Overview of the Group’s strategy

Halfords is already a good business with many existing strengths, including its highly-engaged colleagues, a sizeable and growing services business, leading positions in attractive markets, and a prudent capital structure and strong balance sheet.

These strengths also provide a solid foundation on which to build, but are not sufficient in isolation to provide a long-term, sustainable and profitable business nor counter some of the significant headwinds we face going forwards. The retail environment is ever-changing, with increasing competitive threats and more demanding customer expectations. After a detailed strategic review process we are clear that standing still is not a long term option.

We have chosen to accelerate investment in the business to become a much more differentiated, super specialist with an integrated, unique and more convenient services offer, and to focus on retaining customers for a lifetime. By doing so we will develop a business with long-term, sustainable growth prospects.

Customer, Market and Competitive Context

Halfords operates in the motoring and cycling markets, and has leading market shares in some areas whilst also having significant headroom to grow further. Both markets have good long-term growth prospects, but are increasingly characterised by generalists becoming more sophisticated and encroaching on the space previously occupied by specialists.

There is an increasing demand from customers who want someone to “do it for me”, with customers seeking convenient solutions to fit around increasingly busy schedules. For example, we know that large proportions of 25-34 year olds are interested in the prospect of a mobile fitting service. There are also significant opportunities to improve cross-shop (currently only 2% of our Retail customers also shop at Autocentres) and customer retention (for example, 1 in 3 of our known customer haven’t shopped with us for two years).

The dynamics of the markets that we play in are changing – cars are becoming more complex and fewer people have the knowledge and capabilities to do work on their cars, especially with the shift towards electric vehicles. We are also seeing a massive increase in the popularity of e-Bikes, a trend already benefitting the bicycle markets in European countries.

There are opportunities for scaled, specialist service providers to lead in these changing markets.

customer, market and competitive chart

To inspire and support a lifetime of motoring and cycling

Inspiring our customers through a differentiated, super specialist shopping experience

  • Halfords will become a business more focused on what it is really known for - its core motoring and cycling offer.
  • Customers will be able to buy products and services with features and benefits that they not only want or need, but are only available at Halfords. These products and service will be available from a more innovative and personalised online site together with a complementary and inspiring store environment.
  • Customers and colleagues will also be supported by a unique in-store tablet, digital screen and mobile experience.
  • On average it is 11 years since our stores had investment and as such most stores were designed before a scaled online and services business. Over the next few years we will undertake the biggest refresh of our stores with a truly transformational shift in store format making our stores fit for the future.

Supporting our customers through an integrated, unique and more convenient services offer

  • Customers will be able to access a broader range of services more easily from one single integrated website, combining the separate Retail and Autocentres websites that exist today.
  • Through making more services available across both stores and garages, and a roll-out of more garages, we will significantly reduce the average drive time for our customers to reach one of our service locations.
  • In addition, we will roll out mobile services vans to give customers in major conurbations the option of us coming to them. Collectively this will create a more convenient network of circa 1,000 service delivery locations across the UK and Ireland.
  • Halfords will be the nationwide go-to provider for Electric bike and car servicing.

Enabling a lifetime of motoring and cycling

  • We will place equal focus on retaining customers as well as acquiring new ones. Customers will enjoy building relationships with Halfords for the long term as they are encouraged to explore and benefit from all that we do in both motoring and cycling over their lifetime.
  • How we will achieve this:
    • More sophisticated use of our customer data and CRM capabilities;
    • Launching loyalty mechanics;
    • Improving the cross shop between our businesses.

Infrastructure

This customer strategy is underpinned by continued development of our infrastructure, particularly IT and property.

IT

The IT investments in recent years have already given us a good platform on which to improve our customer experience. We will continue to invest in customer-facing improvements, including our new in-store software and tablets, a new car parts database, and the customer journey enhancements as set out above, along with a re-platform of all our group websites.

We will also be implementing systems to improve efficiencies, such as a new forecasting and replenishment tool.

Property

We currently have a physical estate of 452 Halfords store, 24 Performance Cycling stores (mainly branded as Cycle Republic), 315 garages and 3 mobile vans. The property portfolio is relatively flexible, with an average 6 years remaining lease length, enabling us to continually monitor and adjust to our requirements.

Over the medium term we anticipate the following changes to our physical estate:

  • open 100+ garages, increasing the estate by at least a third;
  • a target to double the Performance Cycling store numbers from 24 to 50+;
  • closing some Retail stores (at a similar run rate; we have closed 6 in the last 12 months);
  • continue to relocate and/or "right size" Halfords stores each year; and,
  • rolling out mobile vans, targeting the major conurbations.

We will also be accelerating investment in refurbishments. We anticipate refreshing up to 90 stores and up to 50 garages a year over the medium term.

Number of stores / garages refreshed

infrastructure

Operational efficiencies

As well as focusing on our customer strategy to create a more unique and differentiated, super specialist business, we will be equally focused on ensuring we have an efficient, cost effective and cash generative business. We will be targeting cost savings and cash efficiencies from property, product, supply chain and in-garage processes, along with synergies from greater integration of our businesses across the Group.

These operational efficiencies will be re-invested into:

  • accelerated capital expenditure;
  • strategic investments in operating costs; and
  • investing in price as and when required to respond to competitive threats over the medium term.