MARKET REPORT: The cost of living crunch puts brakes on Halfords

Shares in Halfords tumbled amid warnings over its exposure to the cost of living crunch.

With the squeeze on family finances intensifying, Panmure Gordon said the cycling and motoring group was ‘naturally at some risk’.

The broker lowered the stock’s rating to ‘hold’ from ‘buy’ and slashed the target price to 150p from 300p. Shares fell 16.4 per cent, or 25.1p, to 128.3p.

With the squeeze on family finances intensifying, broker Panmure Gordon said cycling and motoring group Halfords was 'naturally at some risk'.

With the squeeze on family finances intensifying, broker Panmure Gordon said cycling and motoring group Halfords was ‘naturally at some risk’.

Halfords has shifted its business towards motoring, which accounts for around 70 per cent  of the group’s revenues and includes MOTs, servicing and breakdown cover.

But Panmure warned that its retail division – including the sale of bikes, scooters and accessories such as helmets, lights and locks – was now ‘exposed’ to the economic downturn.

Panmure told clients: ‘Halfords is naturally at some risk coming into the period of significantly increased pressure on consumer spending in 2022. 

We support much of the current strategy but we feel focus mainly on the AutoCentres business has left the retail division somewhat exposed in the current environment.’

Halfords, which has 400 stores in the UK, is planning to update the market on September 7.

Panmure analysts added: ‘We believe that there is significant upside in Halfords and that it is unlikely to go bust, however harsh the coming winter is for UK retailers. But we prefer to wait for better visibility.’

The FTSE 100 fell 0.6 per cent, or 45.68 points, to 7488.11 and the FTSE 250 was down 1 per cent, or 192.45 points, at 19,306.89 on another tricky day for global stock markets. 

Stock Watch – RM

Shares in RM, which provides technology and resources to the education sector, crashed 46.5 per cent, or 46p, to 53p after its losses widened and debt levels rose.

In its results for the six months to the end of May, RM said the return of school exams helped to push its revenue up 4 per cent.

But this was not enough to counter losses, the company said, which hit £5.9million – down from a profit of £2million last year – as investment program costs more than doubled.

Bleak economic figures – particularly in the eurozone – fuelled fears of recession at a time when central banks are raising interest rates to combat red-hot inflation. 

With inflation in double figures – and heading above 18 per cent according to investment bank Citi – investors are betting the Bank of England will raise rates from 1.75 per cent to 4 per cent next year.

Amid turmoil on financial markets, oil rose back towards $100 a barrel, giving Shell (up 3.3 per cent, or 73.5p, to 2317.5p) and BP (up 2.3 per cent, or 10.4p, at 459.4p) a boost.

Among the mid-caps, Tullow Oil gained 6pc, or 2.91p, to 51.55p and Harbour Energy was up 4.4 per cent, or 17.8p, to 423.8p.

But water firms were in the red.

South West Water owner Pennon slipped 2.9 per cent, or 28.5p, to 965.5p, Severn Trent fell 1.2 per cent, or 36p, to 2947p and United Utilities, the water provider to the North West, slid 1.8 per cent, or 21p, to 1120p.

Pharmaceutical giant AstraZeneca failed to make gains despite receiving a ‘buy’ rating from a Deutsche Bank analyst as shares fell 2.1 per cent, or 242p, to 11,198p. 

The broker sounded more caution over AstraZeneca’s rival GSK and issued a ‘hold’ rating which sent its shares down 1.8 per cent, or 25.2p, to 1402.6p.

Bunzl shares inched down despite receiving high praise for its takeover spree.

Shore Capital said the group, which supplies disposable tableware, latex gloves and cleaning chemicals to the private and public sectors, ‘continues to successfully expand its footprint through acquisitions’ having spent around £225million so far in its current financial year. 

Despite the broker issuing a ‘buy’ rating, shares fell 1.9 per cent, or 60p, to 3053p.

Among the mid-caps, Wood Group shares sank 2.4 per cent, or 3.65p, to 146.35p following a slump in profit and revenue.

In its results for the six months to the end of June, the oilfield engineer reported a 5.1 per cent fall in profit to £157million while revenue slid 0.4 per cent to £2.2billion.

 But chief executive Ken Gilmartin, who took over last month, hailed Wood Group’s ‘improving operational momentum’ and ‘great client wins’.

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