Topps Tiles has lowered its profit forecast after a challenging quarter marked by a 1.8% decline in sales and disruptions from extreme heatwave conditions. The Leicestershire-based tile retailer now expects underlying profits for the financial year ending September to exceed £6.5 million, a significant drop from the £9.2 million recorded the previous year.
Sales Decline and Heatwave Impact
In the three months to June 27, the company reported a 1.8% fall in sales, with like-for-like revenues flat across its core Topps Tiles brand. The performance deteriorated as the quarter progressed, driven by shifting customer demand towards lower-priced products amid growing economic uncertainty. The blistering heatwave at the end of June exacerbated trading difficulties, causing temporary work stoppages among housebuilders and traders.
Topps stated: "Recent periods of extreme heatwave conditions led to temporary work stoppages among housebuilders and traders, further affecting activity levels. Whilst there is likely to be a catch-up over a six-month period, this is unlikely to come back fully in our financial year which ends in September."
Profit Warning and Share Price Reaction
The group now anticipates underlying profits for the year to September to come in above £6.5 million, a sharp decline from the £9.2 million earned last year. Shares in the company fell 8% shortly after markets opened on Wednesday, reflecting investor concerns.
Chief executive Alex Jensen commented: "Topps continues to outperform the wider market despite weaker consumer sentiment and an increased focus on lower priced products. We're making significant strategic progress across our priorities and the self-help actions we are taking to support profitability are working and will position the business for long-term sustainable growth. In the short term, the macro-economic environment continues to remain challenging."
Cost-Cutting Measures and Store Closures
In response to tougher trading conditions, Topps Tiles has been aggressively cutting costs. In April, the company confirmed the closure of 23 shops, representing 7% of its 319-strong estate. Store shutdowns across its Topps and CTD brands have placed further strain on revenues.
The acquisition of CTD out of administration drew scrutiny from the Competition and Markets Authority (CMA), which demanded the disposal of several CTD outlets to address competition concerns. The company now operates 23 CTD stores, reduced from an original 31.
Fired Earth Acquisition
In December, Topps Tiles acquired the brand of stricken rival Fired Earth in a £3 million rescue deal. The Oxfordshire-based competitor collapsed into administration in October, leading to the closure of all 20 of its UK showrooms and 133 redundancies. The acquisition is part of Topps' strategy to strengthen its market position despite the challenging environment.
