Topps Tiles warns on profits as sales falter

Flooring retailer Topps Tiles has warned that its profits will be at the lower end of expectations, sparking fresh concerns about the health of retailers exposed to the housing market.
Shares in the company fell by 2.25p, or 3pc, to 72.25p after it announced that it now expected full year sales to hit ?211.6m, 1.5pc lower than a year earlier after like-for-like sales in the year to 30 September decreased by 2.9pc. 
Like-for-like sales in the fourth quarter fell by 3pc, Topps Tiles' third successive sales decline although the drop was less than in the last quarter when sales slipped by 4.7pc.
Topps Tile boss Matthew Williams, whose father started the business over 30 years ago, blamed "tougher market conditions" which he said remained "challenging". 
In July, the business said that a slowing economy and stamp duty changes had hit consumer demand which was weighing on sales.  
While it does benefit from house sales, which encourage home owners to invest in sprucing up their floors, the retailer makes a large chunk of its business from a growing trend for people to spend money improving their homes and buying more outlandish, modern tile designs, rather than putting their properties up for sale.
Topps Tiles warns on profits as sales falter

Matt Williams, Topps Tiles chief executive
Mr Williams said that nine out of ten Topps Tiles' sales were from people doing DIY on their existing homes rather than new home owners.
However, rising inflation and slowing wage growth has prompted some consumer uncertainty which is causing people to delay or defer spending on big ticket items.
B&Q owner Kingfisher said last month that it was cautious on the UK macroeconomic backdrop while sofa retailer DFS in June blamed uncertainty around the election for a profit warning.
"While overall retail sales have held up reasonably well this year, big ticket and home-related sales have suffered", said John Stevenson, analyst at Peel Hunt.
"Like-for-like declines of 2pc to 3pc are far removed from the last recession’s double-digit declines and the balance sheet remains in good shape."
During the period Topps Tiles also sealed a takeover of a small commercial tile business as part of Mr William's strategy to start providing tiles for small business owners such as pubs, hotels and hairdressers.
"We see this as a positive move into a highly fragmented market, which is roughly equal in size to UK domestic space", said Liberum analysts.
"This initial acquisition should allow management to build its understanding and expertise in order to assess and take advantage of further opportunities that are likely to arise over the longer-term."
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