- March sales up high single digits
- Traction with Mission 365 growth strategy
- £4 million in extra costs on slate
Home improvement retailer Topps Tiles (TPT) reported a second quarter acceleration in like-for-like sales growth thanks to the success of its ‘Mission 365’ growth initiatives.
Firmly focused on rebuilding profitability, the tile specialist also delivered positive news on gross margins and flagged ‘good progress’ in finding a successor for CEO Rob Parker, who announced his resignation in January.
So why did the shares tick 5.3% lower to 32.2p in early dealings on 2 April?
The key catalysts were a warning that the macro picture is ‘mixed’ and the external cost environment remains ‘challenging’, with forthcoming National Living Wage and National Insurance hikes to collectively increase Topps’ annual cost base by £4 million.
As Russ Mould, investment director at AJ Bell, observed: ‘Rising costs associated with last year’s Budget are neither new news nor a major shock although the scale may have caught some observers by surprise.’
GROWTH ACCELERATION
Despite a weak backdrop for big-ticket spending, group revenue increased 4% to £127.7 million in the first half ended 29 March 2025 March.
This excludes the contribution from CTD Tiles, acquired out of administration in August 2024 in a deal which remains under investigation by the Competition and Markets Authority (CMA).
Encouragingly, Topps’ underlying sales growth picked up from 3.3% in the first quarter to 4.4% in the second quarter.
The bathroom tiles to flooring purveyor explained that while trading through January was slower, volumes began to build progressively thereafter ‘with this improving trend culminating in a strong performance in March, when the group’s underlying sales (excluding CTD) increased by a high single digit percentage compared to the previous year.’
MIXED MACRO PICTURE
Homeowner sales remained subdued in the first half, yet trade sales within Topps were strong, which suggests those who can afford it are pushing ahead with major renovations while more minor DIY projects are being put on hold.
The Leicestershire-based company called out progress with digital initiatives, a key plank of its Mission 365 growth strategy.
‘Following our return to sales growth in the early weeks of the year, we are pleased to see this trend accelerate in the second quarter, driven by some initial signs of success from our new strategic initiatives, including an improved trader digital experience and further category extensions,’ said Parker.
‘Whilst macroeconomic indicators remain mixed, we remain focused on the delivery of our strategy which we are confident will lead to the achievement of our Mission 365 goal over the medium term.’
Topps added that the CMA has approved in principle its proposed undertaking to sell four of CTD’s stores in lieu of a Phase II investigation. The retailer also stressed it has made ‘good progress’ in identifying potential candidates to succeed Parker as CEO, with ‘a high degree of interest expressed’.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
