July 7, 2020 / 7:03 AM / a month ago

UPDATE 2-Profits gloom overshadows Halfords' cycle sales surge

* Cycling business like-for-like sales up 57.1% in Q1

* Motoring revenue down 45.4%

* Sees full year loss of 10 mln stg in worst case scenario

* Shares down 8% (Adds detail, shares)

LONDON, July 7 (Reuters) - British retailer Halfords said underlying cycling sales surged 57.1% in its latest quarter as people avoided public transport during the coronavirus lockdown, but a gloomy profit scenario sent its shares sharply lower.

The stock was down 8% at 0804 GMT on Tuesday, extending year-on-year losses to 27%, after Halfords said its worst case scenario for the full 2020-21 year was for group like-for-like sales to fall 9.5%.

That would mean a profit scenario ranging from zero to a pretax loss of 10 million pounds ($12.5 million), down from an underlying pretax profit of 55.9 million pounds in 2019-20.

As a provider of products deemed essential, Halfords was able to trade through the lockdown period. It had 359 stores trading as of July 3.

The group said cycling sales were also boosted by fair weather and an increase in cycling as a health and leisure activity.

“We believe cycling demand will remain strong throughout the year and we will work hard to supply these unprecedented levels of demand,” it said.

Group like-for-like sales in the 13 weeks to July 3, its fiscal first quarter, fell 6.5%, with the cycling performance more than offset by a 45.4% decline in the higher-margin motoring division as lockdown limited car journeys.

The group has withdrawn formal guidance for the 2020-21 year because of the uncertainty surrounding COVID-19, but gave three trading scenarios.

To get it through the crisis, Halfords has implemented a range of measures to reduce costs and preserve cash, including suspending its dividend, cutting non-essential spending and making use of the government’s business rates relief and wage support schemes.

The group has 235 million pounds of liquidity.

“Despite the wider uncertainty caused by COVID-19, we remain confident in the long-term prospects for Halfords,” CEO Graham Stapleton said. ($1 = 0.8013 pounds) (Reporting by James Davey; editing by Kate Holton, Louise Heavens and Barbara Lewis)

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