Halfords Market Review

The Halfords Group has a unique place in the UK; through its Retail and Autocentres divisions the Group operates in a number of diverse marketplaces.

Within the Retail segment of the business, Halfords differentiates itself in the markets of automotive, cycling and outdoor leisure across its three strategic pillars of Supporting Drivers of Every Car, Inspiring Cyclists of Every Age and Equipping Families for their Leisure Time.

With 466 locations, Halfords has a favourable market position, being located less than 20 minutes away from 90% of the UK population. Halfords.com, in combination with these stores and their experienced staff, creates multiple channels and configurations for customers, with in-store Reserve & Collect gathering pace in FY13.

The past 12 months has offered a number of one-off opportunities and challenges that have affected a lot of Halfords' core markets. From once in a lifetime national events to record breaking (for all the wrong reasons) weather, FY13 has certainly been a year of note.

Supporting Drivers of Every Car

The automotive market was largely unaffected by the exceptional occurrences of FY13, with only slight developments in the macroeconomic environment.

The number of cars in the car parc increased by c.1%, yet the service market shrank slightly as consumers maintain tight spending control. The increased size of the car parc offers opportunities in the value-driven auto aftercare market though. With bulbs, blades and batteries ("3Bs") becoming increasingly complex to fit on new vehicles and the DIY approach to fixing cars shrinking with each generation of new drivers, the 3Bs fitting market is worth around £950m. With fitting services in demand throughout FY13, Halfords is uniquely placed to provide a value and hassle-free "Do It For Me" ("DIFM") level of service that more and more drivers are set to need.

Since the acquisition of Autocentres, Halfords has also consolidated and strengthened its position in the c.£9bn servicing market. That market was made up of c.22,000 garages in 2012, but that number is consolidating, with outlet numbers dropping between 1% and 2% per annum. Meanwhile, Halfords opens between 20 and 30 new centres each year.

In the auto accessories and enhancement market, there are a number of growth stories and opportunities in new technology too. The Sat Nav market is slowing its decline with a bottoming out of the price deflation that has occurred over recent years, and new technologies are coming through which will necessitate an update for many Sat Nav users.

Halfords has also made gains in audio equipment thanks to reduced competition on the high street, and with the digital switchover on the horizon, this looks set to continue. No other business can match Halfords' skillset and price on Audio fitting and Sat Nav set-up and demonstration.

Halfords has also recently cemented its position as the UK's top online retailer for child car seats, scoring highest in an investigation by Which? into the best buying and fitting advice available.

With bulbs, blades and batteries becoming increasingly complex to fit on new vehicles and the DIY approach to fixing cars shrinking with each generation of new drivers, the 3Bs fitting market is worth around £950m.

Inspiring Cyclists of Every Age

Whilst it is unlikely UK cycling will see another year like 2012 any time soon, with the first ever British Tour de France winner followed by another hugely successful performance from Team GB's cyclists at the London 2012 Olympics, its popularity is expected to grow.

With household names such as Sir Bradley Wiggins and Victoria Pendleton achieving further success and increasing their popularity, and break-out stars such as Jason Kenny and Laura Trott emerging, British cycling has never had so many inspirational ambassadors.

However, these events occurred during an extremely poor year for weather. The Met Office reported that, apart from 2011, it was the coolest summer since 1998, and the wettest summer for 100 years.

These contrasting fortunes make it extremely difficult to measure the exact impact of the Olympics, but what is clear is that the cycling market is buoyant. A Mintel report has estimated that the market reached c.£700m in 2012, and is set to grow by around 23% over the next five years. This can be added to the c.£700m cycling parts, accessories and clothing ("PACs") market and c.£100m cycling repair market, which Halfords is also competitive in.

Within the cycling market itself, while already the largest for family and kids' bikes, FY13 has seen Halfords increase its presence in the premium market.

With a strong brand, increasingly skilled workforce, a growing range of products, an extensive national network of stores and a burgeoning web presence, Halfords' credibility as a place for Inspiring Cyclists of Every Age is improving.

Equipping Families for their Leisure Time

The third of Halford's strategic pillars is spread across several fragmented markets, which can be grouped under the umbrella of camping and outdoor leisure, while also encompassing a wide variety of strategically chosen leisure impulse products.

Through its size and network, Halfords can offer a greater depth of range, competitive prices and convenient locations.

Since 2009, with the lingering effects of the financial crisis "staycations" have become popular in the UK. Continued tough economic circumstances and low consumer confidence has seen the UK camping market grow consistently ever since, with a 2012 Mintel report estimating that there were almost 20 million trips taken by UK residents in 2011.

Halfords has built on the back of this trend, offering a unique combination of products and solutions. Through its size and network, Halfords can also offer a greater depth of range, competitive prices and more convenient locations.

While the leisure market also suffered greatly due to the adverse weather in FY13, Halfords has good opportunities to improve its outdoor offering, with increasing awareness of Halfords as the retailer of choice for leisure equipment.