Sales at Halfords are on the increase, and the company is expanding into Central Europe.
The fun thing about buying shares in retailers is that you can walk in and inspect your potential investment. Whether this is actually a useful exercise is debatable, as we run the risk of assigning too much significance to the factors we can see or easily imagine -- the so-called 'availability bias'. But it is hard to resist.
For example, on a recent visit to Halfords
(LSE: HFD)
for a replacement side-light I was able to look around. Notice that the first place I thought of going for such a specific item was Halfords, not Tesco
(LSE: TSCO)
or Sainsbury
(LSE: SBRY)
.
Observation No. 1: Halfords is a strong brand -- it was the default choice in this situation.
For an extra £2.99, they would fit the bulb for me. Normally this would be a trivial operation, but on my car it practically involves stripping the car down to the chassis (OK, I exaggerate, but only a little), so it looked like a good deal to me.
Observation No. 2: The "We'll Fit It" service is a clever way to squeeze some extra margin, and encourage new customers.
Rather than rushing out to fit the bulb, they first checked their files and in a few seconds were able to tell me that they are not allowed to touch my car as the job is too awkward.
Observation No. 3: They know their business, and have good systems in place to stop scoundrels like me from taking advantage.
In the end I went to the main dealer, who fitted the bulb free of charge in a few minutes.
Observation No. 4: Losing my tiny sale won't bother them.
This morning's trading update shows first half sales up 9.3% in total, and up 6.5% on a like-for-like basis, i.e. ignoring the effect of new floorspace. Allowing for the effect of Easter, which last year fell outside the period, sales were up 5%.
This is a very strong performance at a time when many expected discretionary spending to be under pressure. New legislation requiring children under 12 and under 135cms to use a booster seat will undoubtedly have contributed to the increase.
Something to watch for in 2007 is the company's progress in Central Europe. CEO Ian McLeod has experience on the continent, having previously been a director of Wal-Mart in Germany. Three new stores in the Czech Republic should benefit from an older car population more in need of spare parts.
