Half year report, discussion of impact of Brexit, exchange rate, consumer confidence

Halfords Group plc – Half year report – 2 October 2020

Industry: retail

Chief Financial Officer’s Report (extract)

Brexit and impact of movements in foreign currency exchange rates

As we have previously explained, the decision of the UK to leave the European Union (“Brexit”) gives rise to significant uncertainty as a result of the impact on the wider UK economy. We have previously set out the main areas in which we considered Brexit was likely to impact the Group. We reaffirm and update our assessment of these below:

  • The Group is an AEO accredited business which helps smooth the imports process. However, work is ongoing with our customs and duty management partners to finalise the process for imports and exports to our Irish shops.
  • Impact on exchange rates. The Group buys a significant proportion of its goods in US dollars; between $250m and $300m a year. As previously guided, the majority of our US dollar sourcing is for cycling products.
  • Prolonged uncertainty over exit terms and continued weakness in Sterling could lead to a slowdown in the UK economy and consequent loss of consumer confidence, impacting trading conditions for the Group. However, Halfords has strong positions in fragmented Motoring and Cycling markets, and a service-led offer that differentiates us from our competitors, physical and online. Much of our sales are in needs-based categories that are more resilient to macroeconomic cycles and our discretionary categories, such as cycling, camping and travel solutions, could benefit from an increase in the number of people choosing to stay at home rather than holidaying abroad; a trend that we observed in 2009.