Shares in Topps Tiles (TPT) rally 10.7% to 69.4p as the UK’s biggest tile specialist says adjusted pre-tax profit for the year to 29 September will be 'slightly ahead' of the top end of market expectations.
Before today’s positive update, the consensus estimate stood at £14.9m, but analysts are pushing through upgrades on the news Topps enjoyed improved trading over the fourth quarter.
Topps Tiles is one of several retailers of ‘big ticket’ items that have struggled in a weaker consumer environment as people have become more cautious on spending.
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Yet in a surprisingly upbeat trading update, Topps Tiles says it now expects annual sales of approximately £215m, up from £211.8m in 2017.
Like-for-like sales are anticipated to be flat although this is reassuring when compared to a 2.9% decline last year.
Over 25 new own-brand product ranges, Topps’ focus on value, investment in digital offerings and developing the commercial business have been credited for robust trading in the fourth quarter.
Topps Tiles says like-for-like sales in the 13 weeks to 29 September rose 1.2% thanks to the ‘continued effectiveness of our strategy and outperformance of our market’. Yet investors should avoid popping out the champagne just yet, since uncertainty in the UK economic outlook still looms over the company, which remains cautious as Brexit negotiations continue.
CEO Matthew Williams insists: ‘Our core Topps Tiles business is a well invested, cash generative market leader with a proven strategy and we continue to make good progress with our expansion into the commercial segment of the UK tile market which will be an important source of future growth for the group.’
Peel Hunt analyst John Stevenson upgrades his pre-tax profit forecast for the year ended 29 September by £600,000 to £15.8m and his 2019 estimate by £300,000 to £15.9m based on flat sales and Topps’ tight control of costs.
‘The key question is whether this is a one-off boost from catch-up spending as consumers switch back to home, or whether the sales recovery will drive improved performance over autumn,’ comments Stevenson.
