Topps Tiles shares plunge on half-year profit warning
Topps Tiles issued a warning today that first half profit will fall “materially” below market expectations due to Brits dodging home improvement and a 2019 full of Brexit uncertainty.
Shares plunged 25 per cent in early trading, after investors had expected a profit in the range of £13.5m to £14.5m.
The home improvement retailer said like-for-like sales in the eight weeks to 22 February have dropped 5.5 per cent. That comes after a 5.4 per cent drop in comparable sales in the first quarter of its current financial year, which ended on 28 December.
But Topps Tiles admitted it has been “impacted significantly by political and economic uncertainty in the run up to the UK General Election”.
Topps Tiles’ shares plunged in response, falling 25 per cent to just 59p as markets opened.
Chief executive Rob Parker said the company will now cut costs and boost cash flow in order to remain competitive.
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“Trading conditions in our second quarter have remained challenging, reflecting continued weakness in home improvement spending,” he said.
Economic conditions have improved in 2020, with UK house prices posting a post-election bounce in January. Research published today also found UK house prices have returned to their pre-financial crisis levels for the first time since the crash.
But Parker warned that these improvements will not immediately help Topps Tiles.
“While UK housing market indicators have shown an encouraging improvement in the period since the General Election, these traditionally have a lagged impact on our trading and we would not expect to see any benefit from these until later into the second half,” he said.
“Our performance during this period will be key to the outcome for the year as a whole.
“We remain confident that our market-leading retail offer and recently established commercial operations give us a strong platform from which to deliver sustainable growth over the medium and long term.”
Liberum said it expects no improvement in the second half, and the broker slashed its profit forecasts for Topps Tiles by 50 per cent. “A continued challenging market backdrop means trading has remained tough for Topps,” Liberum said.
“Housing transactions showed a marked step-up in January, but whether this becomes a trend is, as yet, unknown and given the typical 6-9 months lag to any RMI pick-up, we have set forecasts prudently.”
Main image credit: Topps Tiles