Car parts to bicycle retailer Halfords has revealed slumping annual profits and warned trading remains under pressure amid falling demand for bikes.

The group reported an 18.3% drop in underlying pre-tax profits to £36.1 million for the year to March 29, which includes its tyre supply chain business, which it has offloaded as part of an outsourcing deal.

On a statutory basis, pre-tax profits tumbled 45% to £19.9 million.

The chain saw like-for-like cycling sales drop 2.8%, although the wider group saw growth of 5% thanks to better trading at its Autocentres arm, where sales jumped 10.7%.

It said consumers slashed spending “even further” on non-essential big ticket items such as bikes and touring products, as well as tyres, and this is expected to continue throughout the new financial year.

Halfords said trading since the end of March has “continued to be soft”, impacted by low consumer confidence for big discretionary purchases, as well as the poor spring weather which “reduced store footfall and affected sales of both cycling and staycation products”.

It expects cycling and consumer tyres market sales by volumes to continue to fall over 2024-25 and to remain broadly flat in motoring servicing and retail motoring products.

If the forecasts are right and interest rates start coming down this summer and keep coming down, there's no doubt that will help

The group also said it was impacted by high inflation over the year, with costs rising by around £37 million, bringing its total cost inflation to about £120 million in the past three years.

Chief executive Graham Stapleton told the PA news agency that consumer confidence was being held back by interest rates staying higher for longer and election uncertainty.

He said: “If the forecasts are right and interest rates start coming down this summer and keep coming down, there’s no doubt that will help.”

On the election, he added: “Regardless of the result, just getting a result and having greater stability in place and getting uncertainty out of the way will help with consumer confidence.”

Halfords said it had resorted to promotions to boost cycling sales, ramping this activity up by 33% in the second half.

It also said more customers purchased cycling products on credit, affecting the firm’s margins.

He said the “short-term outlook remains challenging”.

The group is pausing some investment on longer term projects during the more difficult trading conditions, for example slowing the pace of planned expansion for its motoring club scheme.

We'll look to be efficient wherever we can in the business

It is trimming overall group costs by another £30 million this year, after cutting out £35 million in the past financial year.

Mr Stapleton said it would look to renegotiate store leases on more sites that were coming up for renewal, while also looking to artificial intelligence (AI) technology to help drive efficiencies, in particular in its contact centre.

He said AI would be not replacing skilled employees and stressed there were no planned job cuts as a result, but did not rule out future impact on staff.

He told PA: “We’ll look to be efficient wherever we can in the business.

“We can’t ever say never as we look at becoming more efficient.”