Competitive landscape
Halfords principally operates in two broad markets: Motoring and Cycling. Around 67% of Group sales are generated from products and services that are principally Motoring related with the remaining 33% coming from Cycling.
Motoring Market
Within Motoring, the Halfords Group operates in two segments:
- Car parts, accessories, consumables and technology; and
- Car servicing and aftercare
There is no single equivalent competitor of Halfords in the UK and these motoring markets are highly fragmented. There are over 30,000 garages in the UK of which two-thirds are estimated to be independents.
Market Trends
After a record year for new car registrations in 2016, the Society of Motor Manufacturers and Traders ("SMMT") reported a decline in new car registrations of around 6% in the 2017 calendar year and circa 12% in the year to March 2018.
A reduction in new car registrations typically results in used cars being held onto for a longer time period. Combined with a strong pipeline of cars feeding into the used car category, this means that we anticipate the used car parc to continue to grow in the years ahead. This will be a positive trend for Halfords given that we predominantly support cars that are over three years old.
Cars are also becoming more complex and customers increasingly need support for small as well as large maintenance jobs. We are seeing an ongoing trend from 'do it yourself' to 'do it for me'. In the year we continued to invest in equipment and in our colleagues to remain at the forefront of technological changes, to give us a competitive advantage in a fragmented market of independent operators. We have made significant progress in training Autocentres colleagues in hybrid and electric training, which is accredited by a leading industry body.
Cycling Market
In recent years Halfords has developed Cycle Republic and acquired Tredz. This means that the Group can now service the needs of all cyclists from mainstream to commuter to enthusiast. The majority of bikes sold by Halfords are own-brand. These brands include Apollo, Carrera and Boardman. Alongside these brands, our Pendleton and Wiggins ranges, which have been developed together with the respective athletes, have also resonated well with customers. We support our ranges with other selected third party bike brands, such as Specialized, Giant, Cannondale, Cube, Haibike, Basso and Lapierre, available at either Tredz or Cycle Republic.
The cycling market is highly fragmented. There are an estimated 2,500 bike shops in the UK. Other than Halfords and a handful of other much smaller chains, the vast majority of the market is represented by independent bike distributors. As the market leader, we conduct extensive research into customer behaviour and trends, as well as the competitive landscape.
Market Trends
The majority of bikes for the UK market are sourced in US dollars from the Far East markets. In 2017, bike prices in the market rose significantly due to the weaker pound, which increased the cost of imported bikes. We anticipated a year ago that this would lead to temporarily lower bike volumes and this has been the case. However, we still believe that volumes will recover in line with their longer term growth trends, over time. This trend was observed over the last significant depreciation in the value of the pound in the late 2000s.
Looking ahead we continue to see good growth prospects for the cycling market for several reasons:
- participation levels in the UK remain lower than in many other European countries;
- the level of female participation in the UK also remains very low;
- the health and wellbeing benefits associated with cycling;
- government infrastructure investment in London and other UK cities;
- the rapidly growing e-bike segment, which makes cycling more accessible to both commuters and older generations; and
- we are seeing existing participants in the cycling market spending more as they increase the amount they use their bikes.
The weather will continue to have an impact on the timing of customer purchases, but overall trends are positive.
