Shares in Topps Tiles (TPT) tumbled after the tiles seller posted a drop in H1 sales amid ‘challenging’ market conditions.
A robust Q1 was followed by a slight slowdown in Q2 as homeowners and trade customers pulled in their horns.
The Middle East conflict is likely to suppress consumer confidence and raise inflationary cost pressures further. Accordingly, Topps Tiles is undertaking a series of self-help measures. Not only will Topps slash head office costs, it will also close 23 underperforming stores over the next 12 months.
Savings on the slate
The wall and floor tile specialist’s H1 revenue softened 0.1% to £142.7 million in a declining home improvements and DIY market. This also reflected volume losses from the protracted Competition and Markets Authority (CMA) probe into Topps’ 2024 acquisition of CTD Tiles.
While Topps continues to outperform the wider market, it is now rolling out a series of self-help measures to offset cost pressures and drive sustainable profit growth. ‘Savings are expected to be weighted toward the second half of the year,’ explained the tools, grouts and adhesives purveyor. ‘And will underpin in-year profit as well as provide sustainable profit improvement.’
What did the CEO say?
CEO Alex Jensen said self-help actions are ‘designed to support year-on-year profit growth and provide a stronger financial platform for 2027 and beyond.’
Investment research firm Edison said: ‘With the more challenging environment apparent, we take a more cautious stance on the outlook for revenue growth in FY26.’ This leads to ‘a 21% reduction in our pre-tax profit (PBT) forecast, and a reduction of our FY27 estimate’.
Edison now forecasts a PBT drop from £9.2 million to £9 million for FY26, ahead of a recovery to £11.9 million in FY27.
Topps Tiles deserves some credit for implementing self-help measures to protect profitability. We also note that trends are more favourable outside the Topps Tiles stores business. Its online brands continue to perform strongly.
While Topps Tiles’ shares trade on a single-digit price-to-earnings ratio with a chunky dividend yield, they are cheap for a reason.
Given the toughening market backdrop, we reckon further earnings downgrades are on the way. Avoid for now.
Read the press release here: https://www.toppsgroup.com/investors/
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