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UK's Halfords on track after pick-up in bike sales

* Cycling-related sales returned to growth in Q3

* Motoring products sales hurt by mild winter

* Shares (Berlin: DI6.BE - news) rise up to 11 percent (Adds detail, CEO, analyst comment, shares)

By James Davey

LONDON, Jan 21 (Reuters) - British retailer Halfords reported a fall in sales of motoring products in the Christmas quarter, but a recovery in cycling-related sales and cost savings left its full-year profit forecast intact, sending its shares up to 11 percent higher.

In November, the bikes to car parts retailer had reported a near 6 percent fall in first-half profit, blaming a sharp drop-off in bicycle sales over the summer.

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But it said on Thursday underlying cycling-related sales had returned to growth in the 15-weeks to Jan. 15, its fiscal third quarter, and Chief Executive Jill McDonald told reporters the firm had won market share.

Halfords said overall retail sales at stores open more than a year were flat in the third quarter, an improvement on a second-quarter fall of 0.6 percent.

Like-for-like sales of motoring products fell 0.6 percent, while cycling-related sales were up 1.1 percent.

"We are pleased with the group's performance, given the unprecedented weather conditions," said McDonald, who joined from fast-food chain McDonald's in May.

She (Munich: SOQ.MU - news) said motoring product sales suffered from December being the warmest since records began, given a clear correlation between temperature and demand for winter related products, such as de-icer, screenwash and batteries.

However, she remained optimistic on prospects for the UK motoring market, noting a record 2.6 million new car registrations in 2015 and favourable trends such as more miles being driven, lower oil prices, the increasing complexity of car parts and the move away from "do-it-yourself" to "do-it-for-me".

At the company's smaller car repair unit Autocentres, like-for-like sales increased 1.9 percent, a ninth straight quarter of underlying growth.

Halfords expects to make a pretax profit in the current year of between 78 million and 82 million pounds ($110-116 million), down from 84.1 million pounds last year.

It (Other OTC: ITGL - news) kept its retail gross margin forecast for a drop of 0.25 to 0.75 percentage points but cut its retail operating cost growth forecast to 1 to 2 percent from 2.5 to 3.5 percent.

Shares in Halfords, down a quarter in the three months preceding Thursday's update, were up 31 pence at 355.4 pence at 1025 GMT, valuing the business at 707 million pounds.

"Valuation does not reflect Halfords' cash generation and the fact it may start returning surplus cash in FY16," said Investec (LSE: INVP.L - news) analyst Kate Calvert, who has a 'buy' rating on the stock.

($1 = 0.7061 pounds) (Editing by Greg Mahlich and Mark Potter)