Topps Tiles Plc (LON:TPT) reported a 2.2% drop in second quarter like-for-like sales, blaming a tough UK retail market.
Bricks and mortar retailers have been under pressure from a shift towards online shopping and a slowdown in consumer spending as higher inflation and stagnant wage growth reduces disposable incomes.
The tiles retailer said while it had a strong first quarter with like-for-like sales up 3.4%, trading slowed in the second quarter.
Shares dropped 8.7% to 73.44p in morning trading.
READ: Investors crack into Topps Tiles after strong Christmas trade
“While we estimate that short-term weather factors in late February and March, and the timing of an earlier Easter, account for around 1.6% of the second quarter like-for-like sales reduction, it is also clear that there has been a softening of the underlying market,” the company said in a trading update on Wednesday.
Growth in the first quarter offset the decline in the second quarter to deliver a 0.6% increase in like-for-like revenues in the six months to March 31. Total revenue in the first half rose to £109.4mln from £106.6mln a year earlier.
Topps Tiles takes steps to address challenges
In response to the challenges in the retail market, the company has been making improvements to its stores, website and product range.
It has also been investing in the Parkside commercial tiles business it acquired last November with the launch of a new website.
"After a strong start to the year, market conditions have become more challenging over the second quarter," said chief executive Matthew Williams.
"While the business has responded well with a performance ahead of the overall tile market, we are retaining a cautious view of market conditions for the remainder of the year."
Liberum remains bullish on Topps Tiles
Liberum left its rating at 'buy', saying it believes the company's cost control measures should provide some supported despite the uncertainty surrounding market conditions.
"We also believe Topps' leading, specialist market position leaves it better placed than its rivals to weather any persistence in softer trading conditions," the broker said.
"We do not see any change in the positive longer-term fundamentals and expect the group's focused strategy, further store roll-outs and the opportunity within the UK commercial tile market to support growth and continued market share gains."
However, Liberum cut its target price to 95p from 100p and lowered its pre-tax profit forecasts for fiscal years 2018 to 2020 by 8%.