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Halfords investors face uphill climb until 2016 Halfords investors face uphill climb until 2016
(4 months later)
So much for the idea that Halfords could soft-pedal in the slipstream created by British cycling triumphs at the London Olympics. The next Olympics in Rio will be in view by the time shareholders know whether new chief executive, Matt Davies, has found a winning formula for the business.So much for the idea that Halfords could soft-pedal in the slipstream created by British cycling triumphs at the London Olympics. The next Olympics in Rio will be in view by the time shareholders know whether new chief executive, Matt Davies, has found a winning formula for the business.
His revamp plan – Getting into Gear 2016 – is honest about the time required for a turnaround. Profits have just fallen by a fifth to £72m but Davies says it may be 2016 before investors see that figure, or something better, again. For good measure, he's chopping the dividend by 35% to free up cash for investment.His revamp plan – Getting into Gear 2016 – is honest about the time required for a turnaround. Profits have just fallen by a fifth to £72m but Davies says it may be 2016 before investors see that figure, or something better, again. For good measure, he's chopping the dividend by 35% to free up cash for investment.
Naturally, the shares fell in a ditch (they were down 16%). But Davies' diagnosis of Halfords' difficulties seem perfectly sensible. The company is meant to be a specialist retailer but it is bound to struggle in that role if 22% of new recruits leave within three months. The best independent bike shops are staffed by loyal fanatics who know their derailleurs backwards, and much the same is true in the car accessory market.Naturally, the shares fell in a ditch (they were down 16%). But Davies' diagnosis of Halfords' difficulties seem perfectly sensible. The company is meant to be a specialist retailer but it is bound to struggle in that role if 22% of new recruits leave within three months. The best independent bike shops are staffed by loyal fanatics who know their derailleurs backwards, and much the same is true in the car accessory market.
Davies envisages a big training programme, including pay rises for better-qualified staff, and investment in stores. It will cost £100m over three years. Given where profits stand, that's not cheap. But investors, once they've overcome their shock, should accept that there were no quick fixes available. Sales had declined in 10 of the last 12 quarters. Whether the grand plan will succeed is, of course, another question. Pets at Home, Davies' last job, looked an easier gig.Davies envisages a big training programme, including pay rises for better-qualified staff, and investment in stores. It will cost £100m over three years. Given where profits stand, that's not cheap. But investors, once they've overcome their shock, should accept that there were no quick fixes available. Sales had declined in 10 of the last 12 quarters. Whether the grand plan will succeed is, of course, another question. Pets at Home, Davies' last job, looked an easier gig.
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