A cycling industry "downward trend" doesn’t stop major UK bike store reporting profits

Following a warning from its parent firm Halfords, the largest bicycling store in the UK, the well-known online bicycle store Tredz known for luxury bike sales posts a £1.4 million profit according to their most recent financial statements, defying an industry tendency of losses.

For context, Tredz was acquired by Halfords in 2016 for £18.4m, and enjoyed its best financial year in 2021, at the height of the pandemic, when it posted pre-tax profits of almost £8m.

For the year ending in April 2023, pre-tax profit for the firm was £1,438,843 (NTD 58,141,328), according to its most recent publicly available financial report, which was issued under Performance Cycling Limited.

This announcement is in contrast to its main rivals in the UK market, Evans Cycles and Wiggle Chain Reaction Cycles, who both reported growing losses in the previous year. The latter then fell into administration in October and was bought earlier this month by Evans Cycles' parent firm, Frasers Group.

The broader view of Tredz's annual records showed earnings that were higher than pre-pandemic levels despite a decline in sales following the Covid-19 boom. The firm made £1,378,775 (NTD 55,719,858) in earnings in 2019, an increase from less than £1 million (NTD 40,402,566) in 2018.

Halfords Chief Financial Officer Jo Hartley made the following statement in response to the financial statements: "The decrease in revenue was the result of a softening in consumer demand due to lower consumer confidence with the cost-of-living crisis more prevalent in the second half of the year." Hartley also pointed out that "more promotional activity being required to generate sales" had a detrimental impact on earnings.

In the bike business, price reductions have been a popular strategy to address excess inventory that arose after the epidemic boom. Companies and merchants including Decathlon, Sigma Sports, and Canyon have all provided discounted prices.

The Tredz board has chosen a cautious going concern basis due to broader industry challenges. Nevertheless, Hartley states: "At the date of signing these accounts [1 March 2024], the company had adequate resources to settle its short- and medium-term liabilities as and when they fall due.

The directors have reached this conclusion after considering the adverse impact the current cost of living crisis is having on the industry the entity operates in and the current downward trend seen in the cycling industry.

Having considered the risk of underperformance, the directors believe that adequate measures can be put in place for the company to remain profitable in the foreseeable future."

According to Halfords’ research, the cycling market has become more challenging and competitive as it continues to consolidate. They expect the same difficult market conditions to continue for the remainder of Q4, including through their peak Easter cycling period in March.