Struggling tiles seller Topps Tiles PLC (LON:TPT) saw a sharp decline in like-for-like (LFL) sales in the quarter just ended.
The company was quick to point out that the comparative period from a year ago benefited from an increased level of housing transactions resulting from Stamp Duty changes kicking in during April, but even so, the market was disappointed in a 4.7% slide in LFL revenues.
The 13 weeks to 1 July was the third quarter of the company’s financial year and in the first half it had posted a LFL sales decline of 1.9%, so trading performance is deteriorating, relatively speaking.
Having said that, as the effects of the Stamp Duty boost from 2016 disappear from the year-on-year comparatives, the position has started to improve in recent weeks.
"At the time of our interim results in May we pointed to a more challenging macro-economic environment and this has persisted through the remainder of the third quarter,” admitted Matthew Williams, chief executive officer of Topps.
“Tougher comparatives resulting from the changes to Stamp Duty in the prior year were a feature throughout the period and we have seen a modest improvement in trading over recent weeks as they have begun to ease,” Williams stressed.
The company, like just about every other bricks & mortar retailer, is overhauling its business approach; Topps Tiles’ initiative is called “Out-specialising the Specialists”, and Williams said it would continue to focus on this “proven strategy” while evaluating selective acquisition opportunities in the commercial segment of the UK tile market.
Liberum Capital said the update showed an improving trend in a tough market.
The 4.7% year-on-year decline in LFL sales in the 13 weeks to 1 July implies an average LFL decline of 2.1% over the six weeks to 1 July, which Liberum said is a “material improvement” on the 6.8% fall reported for the seven weeks to 20 May.
“It is also important to note that the period was up against tough prior year Q3 growth of +6.2%, which benefited from the increase in housing transactions ahead of the stamp duty rises which came in April 2016 and was the strongest quarter in FY16,” the broker noted, echoing the company’s own get-out clause.
“Management continues to highlight that the weaker UK economy is making for difficult trading and we believe that this uncertain backdrop could well persist for the rest of 2017. This tougher environment aside, we see some support from an easing comp, which falls materially to +1.4% in Q4 vs. Q3's +6.2%,” the broker observed.
Meanwhile, the strategy remains on track, Liberum asserts.
“Management reiterates the long-term growth opportunity in the UK commercial tile market, which includes small businesses (pubs, restaurants), new build housing and larger commercial projects. We expect a disciplined approach to be taken, with one or two small acquisitions and a focus on delivering a strong proposition to commercial customers, before significant expansionary cost investment is made,” Liberum said.
Shares in Topps were down 2.1% at 81.25p in late morning trading.