Topps Tiles upholds annual profit guidance thanks to strong third-quarter performance
Topps Tiles shakes off construction gloom as cost pressure eases and sales skyrocket in Q3
- Topps Tiles revealed that sales for the three months ended July 1 were 4.4% higher
- Profit margins at the company are under pressure from rising construction material costs
- The company has been a notable beneficiary of the pandemic-induced DIY boom
Topps Tiles maintains its full-year earnings outlook after sustained demand during the last quarter.
Sales for Britain’s largest tile retailer for the three months ended July 1 were 4.4 percent higher year on year, supported by more than 60 percent growth in its online pure play brands.
The group’s like-for-like sales rose 2.5 percent as the group benefited from lower inflationary pressures on goods and freight costs.
Outlook: Topps Tiles forecasts annual earnings to be in line with market expectations
On a nine-month basis, the retailer’s total sales increased 7.6 percent, driven by the acquisition of Pro Tiler Tools and the launch of Tile Warehouse in 2022, contributing to record first-half sales.
As a result, it expects adjusted profit before tax for the 12 months ended July 4 to be in line with current guidance at between £11.3m and £12.3m compared to £15.3m last year.
Profit margins at Topps Tiles are under pressure from higher building material costs and supply chain disruptions such as a shortage of truck drivers and major logistical problems in UK ports.
The Russian invasion of Ukraine has also increased the cost of clay and gas, both essential components for tile making.
Still, the Leicestershire-based company has weathered much of the economic gloom hitting the building materials industry, which has also been hit by successive base rate hikes and rising mortgage rates by the Bank of England.
Rob Parker, chief executive of Topps Tiles, said: ‘Looking forward, we are confident that our strengths of leading brands, world-class customer service, specialist expertise and a strong balance sheet will enable us to continue to deliver value for all stakeholders. .’
Topps Tiles benefited from the Covid-induced DIY boom as travel restrictions encouraged Britons spending more time indoors to use some of their extra savings for property upgrades.
Trade was further boosted by a temporary vacation from stamp duties, rock bottom interest rates and the rise of hybrid working.
The company achieved record sales for two consecutive years in 2021 and 2022 and expects to reach its target of representing £1 out of every £5 spent on tiles and related products in the UK by 2025.
Jocelyn Paulley, retail partner at law firm Gowling WLG, said: ‘Despite the major economic challenges facing all retailers today, it has weathered this period well through efficient supply chain management and the onset of a plateau of cost price increases.’
Topps Tiles Stock were flat at 48.5 pence Wednesday morning, meaning their value is up more than a fifth over the past 12 months.