Topps Tiles PLC on Tuesday reported annual revenue growth which was more than offset by rising costs, leading to a lower profit.

The Leicester-based tile retailer said in the financial year ended September 30, pretax profit fell 38% to £6.8 million from £10.9 million a year prior.

Boosted by ‘record sales,’ revenue grew 6.3% to £262.7 million from £247.2 million. Sales per store were 30% higher than pre-pandemic levels.

Notably, cost of sales increased 10% to £123.5 million from £111.8 million, while distribution and selling costs increased 4.5% to £93.8 million from £89.7 million. Administrative costs came in 8.4% higher at £21.5 million compared to £19.8 million.

Topps Tiles noted higher interest rates, prolonged high inflation, falling prices and lower housing transactions.

The company declared a final dividend of 2.4 pence per share, down 7.7% from 2.6p a year prior. However, this brought the total dividend to an unchanged 3.6p.

The firm highlighted that it achieved its ’1 in 5 by 2025’ market share goal two years early, with its market share growing to 22% from 19.8% in 2022.

Looking ahead, Topps Tiles said it was ‘Well-positioned to continue to take market share due to competitive advantages, including market-leading brands, world-class customer service, specialist expertise, strong balance sheet, growing cash position and ambitious growth strategy.’

Chief Executive Officer Rob Parker said: ‘While profitability for the year reflects the impact of inflation on our cost base, particularly during the early months of the period, these pressures began to abate in the second half, with the smaller store estate and the cost reduction plan at Parkside providing further mitigation.

‘As we enter our new financial year, it is clear that there has been a weakening of discretionary consumer spending. The business is well positioned to deal with this period, our established brands are market leading, we are competitively advantaged and we are confident that we will continue to take market share. When combined with a strong balance sheet, this will support the Group’s ambitions over the medium term.’

Topps Tiles shares were 1.4% higher at 46.60 pence each on Tuesday afternoon in London.

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