Topps Tiles H1 profitability hit by weaker market

3rd Apr 2024 07:39

(Sharecast News) - Topps Tiles cautioned on Wednesday that first-half profitability would be hit by a number of factors including a weaker market, as it reported a fall in revenues.

In an update for the 26 weeks to 30 March, the tile specialist said total sales were down 5.9% year-on-year to £122.6m, against a record performance in 2023.

It said that "subdued" demand in the domestic repair, maintenance and improvement (RMI) sector, especially for bigger ticket projects, had persisted into 2024. This led to lower footfall into Topps Tiles stores, especially across the homeowner customer group.

The company said trade customers once again proved more resilient, although trade sales were also lower year-on-year.

While conversion rates grew year-on-year and the brand made further improvements, like-for-like sales in Topps Tiles fell 11.3% year-on-year in the second quarter, driven by lower footfall and volume.

As expected, the gross margin percentage in Topps Tiles was up year-on-year as cost of goods pressures continued to ease, but net profits were dented by lower volumes, operating cost inflation and the impact of operational gearing, despite strong cost control throughout the period, it said.

The company said: "Group profitability in the first half of the year will be impacted by a number of factors including the weaker market, the timing of the holiday pay accrual and seasonally higher energy usage in the period. We continue to expect the group's profits in 2024 to be weighted towards the second half as indicated in our Q1 trading update.

"With its market leading brands, specialist expertise and world-class service, the group is well positioned to benefit from a cyclical recovery in the RMI market. The business remains in a strong financial position, with a robust balance sheet, and is focused on maximising market opportunities and emerging in a stronger competitive position as the market improves. The group plans to discuss its new goal and future profit growth opportunities at the Interim Results on 21 May 2024."

At 0808 BST, the shares were down 3.4% at 42.50p.