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Here’s why the Halfords (HFD) share price surged today

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The Halfords (LSE: HFD) share price surged by over 15% after the market opened today. The catalyst behind the share price rise was the company releasing its interim results for the financial year 2022.

Although the stock is up over 20% this year, it has been quite volatile. In fact, the share price fell almost 40% from July to November. Let’s take a look at the results to see how the business is performing, and whether I should consider buying it for my portfolio.

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Interim results

I can see why the share price popped after the update today, because the results are very good. Revenue grew a strong 19.2% against the equivalent period pre-Covid (which management say is a fairer comparison). Market share is also expanding in the retail motoring and auto centres divisions.

The outlook statement was highly impressive, too. Sales momentum is described as continuing into the second half of the financial year. Most importantly, full-year underlying profit before tax has been upgraded to between £80m and £90m, and up from the previous guidance of above £75m.

Even the continued global supply chain issues (which many businesses are dealing with) were said to be easing.

On review of the results, it’s easy to see why the share price surged today.

Growing trends in electric mobility

Halfords has been a staple in British retailing for decades, and perhaps best known for its motoring and cycling services. But the results today showed that it is making inroads in the electric mobility market. Sales of e-bikes, e-scooters, and accessories surged 140%!

The interim results also showed accelerating demand for electric vehicle (EV) servicing, with the number of EVs being brought into Halfords’ garages increasing by almost 124%. In fact, Halfords confirmed it has plans to double the number of trained electric technicians next year to maintain its market-leading position.

Risks still apparent

It’s hard to pick faults in the interim results, but with any business, there are always risks to consider.

I think Halfords could still be impacted by the global supply chain disruption. Although management said it is easing “somewhat”, freight costs still remain elevated.

Further inflationary pressures are also likely to impact the business, most notably in the labour market, but also from rising energy prices. The CEO confirmed in the interim results that these cost pressures are already known. However, any further increases could weaken margins in the year ahead.

Final thoughts

Taking everything into account, Halfords has performed extremely well over the previous six months. There is also an exciting growth strategy playing out in the EV space, too. There are still risks to contend with, particularly relating to inflationary pressures. However, the management team has dealt with these issues very well so far, giving me confidence in the business. I’m strongly considering the stock for my portfolio.

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Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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