Topps Tiles shares trade lower despite H1 sales growth

(Sharecast News) - Shares in floorings retailer Topps Tiles headed south on Wednesday after it said trading had started slowly in January but stated volumes had begun to improve through February and March. Topps Tiles said group sales were up 4% at £127.7m in the six months ended 29 March, while Q2 underlying sales had grown 4.4% and underlying core like-for-like sales were up 3.7% in Q2.

"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," said Topps.

The London-listed firm noted that while homeowner sales remained subdued, trade sales within Topps Tiles were "strong" and progress with its digital initiatives "continued at pace". Total trade sales in the Topps Tiles brand were 12% higher year-on-year in H1, with the number of active traders at the end of the period up 11% year on year to 146,000. Sales made through Topps Tiles' digital channels were up 15% in H1, while online trade traffic was up approximately four-fold.

Topps said its focus on rebuilding profitability, including a review of product pricing, product mix and discount structures has, in recent weeks, delivered a "strong improvement in gross margins" despite the continued increases in trade mix.

However, it also noted that the external cost environment "remains challenging", including the forthcoming increases in National Living Wage and National Insurance which will collectively increase its cost base by roughly £4.0m on an annualised basis from April 2025.

"As announced in the 2024 results, the timing of holiday pay accruals (exacerbated by the later Easter year on year), seasonally higher energy usage in the first half, investments in strategic growth and the timing of the sales recovery will result in the group's profits in 2025 being weighted significantly towards the second half of the financial year," added Topps.

As of 0940 BST, Topps Tiles shares were down 4.34% at 132.52p.

Reporting by Iain Gilbert at Sharecast.com