- Q3 like-for-likes down 9.7%
- But signs of sales stabilisation
- ‘Significant’ online gains
Topps Tiles’ (TPT) shares slid 4.2% to a 52-week low of 39p after the UK’s leading tile specialist reported a 9.7% plunge in third quarter like-for-like sales as ‘challenging’ market conditions persisted.
The share price reaction might have been harsher had Topps not stressed that sales stabilised through the quarter, with spending from trade customers remaining more resilient than from hard-pressed homeowners grappling with high inflation and elevated interest rates.
Sentiment was also soothed by the fact the floor and wall tiles seller has continued to take share in a declining UK tile market, leaving the Leicestershire-based business well-placed for an eventual cyclical recovery.
TOUGH TIMES FOR TOPPS
Total group sales were 6.9% lower year-on-year in the third quarter to 29 June 2024, with the 9.7% like-for-like sales decline similar to the 9.2% drop seen in the first half.
At the group level, total sales were 6.9% lower year-on-year in Q3, a modest improvement on the 7.3% decline reported for the first seven weeks of the period when Topps Tiles posted its first half results.
In common with the likes of Kingfisher (KGF), Wickes (WIX) and Travis Perkins (TPK), Topps Tiles is facing an uphill struggle to deliver growth in a UK RMI (repair, maintenance and improvement) market where demand remains subdued, especially for bigger-ticket projects.
UK homeowners remain under too much financial pressure to spend freely on home improvement projects in the way they did during Covid lockdowns.
RECOVERY OPPS FOR TOPPS?
‘Positive macroeconomic data on inflation, real wage growth, improving consumer confidence and increased activity in the housing market provides some confidence in a cyclical recovery,’ said Topps Tiles, ‘and the group is well-positioned to benefit from this due to its growing market share, leading brands, specialist expertise and world-class service, underpinned by its strong balance sheet.’
This recovery has yet to feed through into Topps Tiles’ end markets however, so the company is pushing ahead with self-help measures to generate sales and profit growth while it waits for a more benign economic backdrop.
ONLINE GAINS
Julie Palmer, partner at Begbies Traynor (BEG:AIM), said the update shows Britain’s leading tile retailer ‘continues to struggle as the pressures on household budgets force homeowners to delay any home improvement projects’.
But Palmer pointed out its ‘not all bad news and the Online Pure Play division continues to perform well and grow market share. On top of that, despite an undoubtedly tricky trading environment, Topps Tiles has outperformed a falling market which is no mean feat.
‘Alongside this, the retailer has set ambitious medium-term targets to put itself on the right track for an eventual recovery. While there is no easy fix to the current pressures it faces, Topps Tiles does hold the leading position in the UK market and its focus on strategic improvements, that include clear roadmap to a return to future growth, should position it well for future success when consumers return to DIY and upgrading their homes.’
