Profits at the UK’s largest tile and wood flooring retailer suffered a 22 per cent fall but Topps Tiles today said it has been encouraged by a pick-up in recent trading.
The firm, which operates 320 stores and has a 26 per cent share of the market, saw underlying profits fall to £5.6 million in the 26 weeks to 31 March, driven by a 4.7 per cent drop in like-for-like sales.
Sales at the start of the second half of its year were up by 4.5 per cent after April’s dismal weather put the focus back on home improvement projects.
However, the Leicester-based group, which also trades as Tile Clearing House, warned that trading conditions remain challenging and it was too early to say whether this marked the start of an improving trend.
Seymour Pierce stockbrokers said today’s profits figure was short of the £6.8m it expected but that recent trading meant it stuck by its full-year forecast for a profit haul of £13m.
Analyst Freddie George said: “We remain concerned that the DIY sheds, in particular B&Q, which has recently launched a new tile range, and other retailers, which are improving their ‘Home’ offers, will start to impact Topps’ revenues.”
He added that the completion of the company’s second warehouse at its Leicestershire headquarters should enable a longer term shift to direct sourcing and improved margins.
Topps hopes the new facility will enable it to fulfil its ambition of expanding to a chain of around 400 stores in the UK.
It opened five Topps stores and converted seven Tile Clearing Houses into the more-profitable Topps format during the period.
The Topps brand is supported by a marketing campaign that sees it sponsor the weather on ITV’s Daybreak morning programme and Channel 4 News.
Topps, which opened its first specialist tile centre in Manchester in 1963, said gross margins were flat in the period despite high levels of discounting on the high street.
It plans to grow margins through buying more of its products directly from manufacturers.
Shares were up 3 per cent in early trading.
Bottom-line pre-tax profits dropped by half to £5m, partly as a result of a series of charges for property and equipment.
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