Halfords has substantially improved the profitability of its UK Autocentres operation despite continued weakness in the replacement tyre market. The apparent contradiction points to a more important development than the group’s headline profit recovery: Halfords is changing how it makes money from a tyre customer, combining fitting with servicing, repair, alignment and more productive use of its workshop network.
The most revealing number in Halfords’ latest results may not be group profit at all.
It is 55.6%.
That was the gross margin generated by Autocentres, excluding software business Avayler, in FY26. Two years earlier, the equivalent figure was 49.3%. Over the same period, underlying operating profit rose from £15.1 million to £22.3 million, an increase of almost 48%.
That would be notable under any circumstances. It is more significant because the improvement has taken place while Halfords has repeatedly described the replacement tyre market as weak.
Consumer garages delivered around 8% like-for-like growth in FY26, with service, maintenance and repair, or SMR, more than compensating for continuing tyre weakness. Halfords did see signs of tyre-market stabilisation towards the end of the year, but tyres were not the principal engine behind the profit improvement.
For tyre retailers, wholesalers and fast-fit operators, that raises a useful question. Where does Halfords now believe the money is in the automotive aftermarket?
The evidence suggests the answer is increasingly not one product or service, but the ability to capture more economic value from each vehicle entering the network.
Halfords’ Autocentres progression is unusually clear.
In FY24, revenue excluding Avayler was £713.4 million, gross margin stood at 49.3% and underlying EBIT was £15.1 million. Better Buying, pricing optimisation and improved technician utilisation were already contributing to the result.
By FY25, underlying Autocentres EBIT excluding Avayler had risen to £18.3 million. Halfords attributed the improvement partly to Better Buying, strong SMR growth and productivity gains. Its tyre supply-chain restructuring also generated £4.4 million of savings during the year.
FY26 extended that pattern. Autocentres excluding Avayler generated £723.1 million of revenue and a 55.6% gross margin, while underlying operating profit reached £22.3 million. Its operating margin improved to 3.1%.
The important point is how the pieces fit together. Higher-margin SMR changes the sales mix. Better purchasing and pricing improve the economics of those sales. Additional services increase the value attached to a workshop visit. Higher technician utilisation then spreads labour and property costs across more productive hours.
This is not simply diversification away from tyres. It is an attempt to make the workshop work harder economically.
That distinction matters for a tyre industry already considering how workshop productivity could change as automation enters the tyre bay and other operators expand tyre businesses into MOT and mechanical repair.
A tyre remains a valuable reason for a motorist to enter an Autocentre. What appears to be changing is what Halfords expects to earn around that visit.
Its FY26 results specifically identify increased attachment of add-on services in tyres as one contributor to gross-margin expansion. The company has also invested in workshop equipment and wheel-alignment capability as it develops the proposition.
Economically, the logic is straightforward.
A customer arriving for replacement tyres already has the vehicle on a ramp and has accepted the need to spend money on it. That creates legitimate opportunities to identify alignment issues, servicing requirements, MOT work and mechanical repairs.
Wheel alignment is particularly relevant because it sits naturally alongside tyre replacement. It can increase transaction value while addressing a condition that affects tyre wear and vehicle behaviour. The tyre sale therefore becomes both revenue in its own right and an entry point into a wider workshop relationship.
This does not mean tyres have become unprofitable, nor does Halfords’ experience demonstrate that every independent tyre retailer should build a full SMR operation. Workshop skills, equipment, property, local competition and customer mix differ considerably.
It does suggest, however, that judging a tyre customer purely by the gross profit on the tyres may understate that customer’s value to a multi-service operator.
That perspective also changes how the 2021 acquisition of National Tyres looks five years later.
Halfords agreed to acquire Axle Group Holdings for £62 million in December 2021. The transaction included National Tyres and Autocare, Tyre Shopper and Viking Wholesale Tyres and added 234 garages, 68 vans and around 1,200 colleagues. At the time, Halfords emphasised scale in motoring services, tyre capability and purchasing synergies.
Tyre scale was clearly important. But subsequent decisions make the physical garage estate look increasingly significant.
A national network of workshops is not merely capacity for selling and fitting tyres. It is hundreds of locations at which Halfords can potentially sell MOTs, servicing, repairs, alignment and other vehicle services.
That distinction becomes particularly interesting because Halfords subsequently disposed of part of the infrastructure that originally accompanied the acquisition.
In other words, the enduring strategic value of National may prove to be less about buying tyre capacity alone and more about buying a national automotive service network.
Halfords’ Fusion programme takes the same principle further by bringing its retail and Autocentre operations together at selected locations.
The early Halifax and Colchester trials produced more than 100% revenue growth and roughly doubled site-level EBITDA, according to Halfords. Subsequent rollout has been based on investment of around £200,000 per location with an expected payback of approximately two years.
By the end of FY26, 103 Fusion locations were trading. Halfords says mature sites roughly double their contribution on average and has linked the format with SMR growth and improved utilisation.
“Contribution” should not be confused with profit, but the direction of the economics is important.
Fusion is easy to view as a property concept, essentially a shop and garage placed together. Its more interesting feature is the ability to combine customer demand.
Someone buying a bulb, battery or wiper blade is also the owner of a vehicle that will eventually require tyres, servicing, an MOT or repair. A tyre customer may need alignment. A servicing customer may require tyres.
The commercial proposition is therefore closer to one customer, one vehicle and multiple potential transactions.
Digital integration strengthens that model because workshop capacity is only valuable when customers can find and book it. Halfords has continued investing in its digital customer journey and garage systems, while its fleet operation has also moved towards real-time workshop availability, as seen in the 1link integration covering more than 500 Halfords service centres.
Perhaps the most revealing strategic decision concerns something Halfords stopped doing.
In 2024, the company restructured the tyre supply chain inherited through Axle Group, closing the Viking and BDL wholesale operations and transferring tyre warehousing and distribution to specialist distributor Bond International.
At announcement, Halfords expected the change to reduce annual costs by around £5 million from FY25 while improving stock availability. It subsequently reported more than £4.4 million of savings in FY25 alongside better same-day and next-day availability.
This is strategically more interesting than a conventional outsourcing story.
Halfords originally regarded Viking’s wholesale distribution network as an important benefit of the National acquisition. It later concluded that a specialist distributor could operate that part of the chain more efficiently while Halfords retained benefits associated with its tyre sourcing arrangements.
The question, then, is what parts of the tyre value chain Halfords believes it actually needs to own.
Its decisions suggest priority is being placed on control of the customer relationship, workshop capacity, technicians, digital booking journey and service proposition. Warehousing and physical tyre distribution can, in its model, be provided externally if service levels and economics are better.
That is not an argument that outsourcing is inherently superior. A tyre wholesaler, vertically integrated retailer or regional operator can have entirely different economics. Distribution capability itself can be a competitive advantage.
But Halfords’ choice reveals where it currently wants to concentrate capital and management attention.
That brings the argument back to technicians.
A garage network can have strong purchasing terms, good locations and substantial customer traffic and still produce disappointing returns if workshop hours are poorly utilised.
Halfords has consequently made technician utilisation a central Autocentres priority. During FY26 it redeployed labour hours towards garages with stronger utilisation, reduced agency labour and simplified operational KPIs. Despite substantial wage inflation, labour cost as a proportion of sales was improving by the fourth quarter.
Fusion has given the company another source of evidence. Halfords says the programme has taught it how to match technician hours more closely with local service demand and which physical investments generate the strongest returns.
That matters because a 3.1% Autocentres operating margin still leaves considerable room for improvement.
Halfords’ medium-term ambition is 5% to 6%. Reaching that level will require more than continued revenue growth. It implies further progress in sales mix, workshop loading, technician productivity, pricing, purchasing and attachment of additional services without allowing operating costs to consume the extra gross profit.
The next phase is therefore likely to be less about proving that SMR can grow and more about demonstrating that a large national workshop estate can consistently convert that demand into higher operating margins.
Halfords also has a structural market trend working in its favour.
The company estimates that the average age of the UK car parc increased from around 7.5 years in 2019 to 10.1 years in 2024. Older vehicles are generally more likely to require maintenance and repair, while a greater proportion sit outside manufacturer servicing packages and franchised dealer relationships.
For an operator with a large garage estate, that expands the addressable opportunity beyond replacement tyres.
The implications are particularly important because tyre demand and SMR demand do not necessarily move together. Consumers can defer some tyre purchases, trade down between brands or reduce mileage. An ageing vehicle, however, continues accumulating maintenance requirements, especially where owners intend to keep it for longer.
Halfords is attempting to position its workshops across both needs.
Halfords is an imperfect template for the wider tyre industry. Its retail stores, national brand, garage estate, digital investment and purchasing scale give it options unavailable to many independent operators. Its 3.1% Autocentres operating margin also shows that extracting attractive returns from a large workshop network remains difficult.
But the direction of travel deserves attention.
In two years, Autocentres gross margin has moved from 49.3% to 55.6% and underlying operating profit from £15.1 million to £22.3 million, even though replacement tyre conditions remained difficult. Halfords has simultaneously increased SMR, pursued tyre add-ons and alignment, rolled out Fusion, reworked workshop utilisation and outsourced a substantial part of tyre distribution.
Taken together, those actions suggest a business redefining what it wants from the tyre transaction.
The tyre still brings revenue, technical work and customers through the door. What matters increasingly is what happens around it: how efficiently the vehicle is processed, which additional services are relevant, whether the customer returns and how much of that vehicle’s lifetime aftermarket spending the operator can capture.
For the tyre trade, that is a more consequential question than whether Halfords sells more or fewer tyres next year.
If replacement tyre volumes and margins remain under pressure, will the strongest tyre retailers of the future be those that sell the most tyres, or those able to extract the greatest sustainable value from every vehicle that comes through the workshop?
Tags: Halfords Autocentres, National Tyres, UK tyre retail, replacement tyre market, tyre retail margins, automotive aftermarket, SMR, wheel alignment, Fusion, Bond International, workshop productivity, tyre distribution
Disclaimer: This content may include forward-looking statements. Views expressed are not verified or endorsed by Tyre News Media.
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