Halfords chief warns suppliers to pay fee to support turnround

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The chief executive of Halfords warned that suppliers who refused to pay the retailer a fee would “reduce their likelihood of doing business with us”.

Matthew Davies, chief executive, made clear suppliers that failed to pay as much as 10 per cent of annual sales made through the retailer would not be looked on favourably.

Halfords has invested heavily in turning round its stores, slashing its dividend by a third in order to invest £100m in an attempt to boost flagging sales.

Mr Davies said suppliers should help support this plan – which has already significantly boosted sales – by reaching for their wallets.

“We are not a charity,” Mr Davies said. “Our strategy is about driving top-line sales growth. Our suppliers are benefiting from that growth. That growth does not come free: there is significant investment. We are asking our suppliers to support that investment.”

He added: “Suppliers that want to work with us in partnership are going to be better placed than those who don’t want to be part of Halfords going forward.”

Halfords is the latest retailer to demand that suppliers either provide a discount or pay a fee. Debenhams and Mothercare, which have struggled with falling sales in the UK, have both recently asked suppliers for a handout.

The comments came as Halfords reported very strong growth as Britain’s love affair with cycling grows and Mr Davies’ turnround plan starts to show results.

Cycling sales rose 19.4 per cent for the year to 28 March, as the post-Olympics cycling boom in the UK showed little sign of slowing. This performance was helped by a 41.6 per cent jump in sales in the group’s final quarter.

Pre-tax profit edged up 2.3 per cent to £72.6m as sales jumped 7.9 per cent to £939.7m.

Halfords has focused on improving its customer service by improving staff training and trying to reduce staff churn. The retailer has cut its staff numbers by 1,000, instead giving more hours to experienced staff.

The group’s Autocentre division suffered from a mild winter, triggering fewer visits to the mechanic across the country. “The winter was terrible for us in the fact that it wasn’t terrible – a mild winter does us no good at all,” said Mr Davies. Although total sales in its car repair division rose 8.6 per cent for the year, like-for-like sales fell 0.1 per cent.

Sales of satnavs – once a cash cow for the group – dropped 8 per cent. But Halfords still has a 40 per cent share of this declining market and no plans to drop out of it. “I can’t see a stage where Halfords is not the go-to place for satnavs,” Mr Davies said. “They make good money.”

The results sent shares in the group up more than 10 per cent to 489p – well above the 339p when the turnround plan was first announced in May last year.

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