Gloom across the high street deepened today after Halfords and Carpetright both issued profit warnings
Halfords, the car and bicycle retailer, said profits would fall short of forecasts after worse-than-expected trading in the 13 weeks to April 1, while Carpetright issued its second profit warning of 2011.
Shares in Carpetright plunged 9 per cent to 609.9p in early trading, while Halfords fell by 6.4 per cent to 344.9p.
They are the latest in a series of British high street stores to issue profit warnings in recent weeks, as consumer confidence wanes and the Government’s austerity measures begin to bite. Yesterday was the start of the new tax year and was dubbed “worse-off Wednesday” since a number of austerity measures came into force which included more people paying 40 per cent tax on their salaries.
Argos-owner Home Retail Group, Dixons, Mothercare and HMV have all recently warned on profits. Yesterday, Marks & Spencer revealed better-than-expected sales but admitted that the year ahead could prove “challenging” as households cut back on discretionary spending.
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With inflation in the cost of food and clothing continuing, and markets factoring in a rise in interest rates before the summer, British consumers are having their budgets squeezed.
Halfords said that 2010-11 profit before tax would come in between £124 million and £127 million, down from previous analyst estimates of £127 million to £135 million. Sales at Halfords suffered in the first three months of this year as fewer people spent money on car maintenance
Profits were also hit by the cost of opening more Autocentres for MOT testing and vehicle servicing.
Like-for-like car maintenance sales at the retailer were down by 11.7 per cent in the 13 weeks to April 1, compared with the same time in last year. Car enhancement sales in stores open for more than a year fell by 8.8 per cent compared with the same period in 2010.
The cost of running a car has shot up in recent months as the price of oil has risen.
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The cycling and outdoor equipment end of the business performed better, with sales up by 6.1 per cent for the quarter.
Product cost pressures are rising at the company as the cost of raw materials continues to increase.
Overall sales were stagnant as Autocentres brought in increased sales. Halfords opened 16 new Autocentre branches in the past year, after buying Nationwide Autocentres in February 2010, and is planning to open another 30 by this time next year.
The division made operating profit of about £7 million in its first year as part of the Halfords group.
Halfords’ chief executive David Wild said that the year had been “challenging”, adding: “We believe the environment will remain difficult for customers.”
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The company is starting a share buyback programme of as much as £75 million this year.
Carpetright, founded by Lord Harris of Peckham, said that profits for 2010-11 would come in lower than expected, and would fall back to the £17.2 million it made in 2008-09 after rebounding last year.
As recently as February, it said that it expected profits to be above that level but still below the £28.2 million of 2009-10.
The company said that “difficult trading conditions have persisted in the UK and the Republic of Ireland,” and added that “fragile consumer confidence” had damaged the carpet market.
Fewer people are buying new houses to redecorate during the recession.