Halfords profit falls as weaker pound lifts costs

(Reuters) - British bicycles to car parts retailer Halfords Group (HFD.L) on Thursday reported a smaller than expected half-year profit, hurt by higher costs resulting from a weaker pound.

Weakness in the currency since Britain's vote to leave the European Union has raised Halfords' sourcing costs, prompting it to implement a plan to reduce the impact, including working with suppliers and raising prices.

Sterling's depreciation resulted in a rise of 15 million pounds to Halfords' cost of sales in first half, which the company said was in line with its forecast of a total of 25 million pounds for the full year.

"Our plans to mitigate the forex impact are on track and working well. At current exchange rates this impact will reduce significantly going forward," Chief Financial Officer Jonny Mason said on a post-earnings call.

Underlying pretax profit fell by 9.8 percent to 36.8 million pounds in the 26 weeks to Sept. 29, slightly missing analysts' average estimate of 37.4 million pounds, on revenue up 3.8 percent at 588.7 million pounds.

The retail gross margin dropped by 182 basis points to 45.7 percent, the company said in a statement.

Shares in Halfords were down 5.6 percent at 315 pence 0921 GMT, though Investec Securities analysts said the worst of the forex headwinds are now behind the company.

Halfords, undergoing a leadership transition after former CEO Jill McDonald moved to Marks & Spencer (MKS.L), stuck to its guidance for the full year, which will include the crucial Black Friday and Christmas holiday season sales.

The retailer has appointed Dixons Carphone (DC.L) executive Graham Stapleton as its new CEO from January, with Mason filling the post on an interim basis.

Haldfords said it would pay a 3 percent higher interim dividend of 6 pence per share.

(Reporting by Ismail Shakil in Bengaluru; Editing by David Goodman)