Shares in tiles and flooring retailer Topps Tiles (TPT) edged 0.5% higher to 57.5p after the company saw a surge in sales in the 13 weeks to 26 December, but warned the new lockdown will impact trading.
In a first quarter trading update, the firm reported a 19.9% increase in like-for-like sales compared to a 5.4% decrease in the same period a year ago, with strong growth across both its main customer groups - professional fitters and homeowners.
Tiles and associated products are building materials and the firm continues to trade under the building supplies exemption, but under the current lockdown rules for England it has had to close its tile aisles in stores to prevent browsing.
MARGINS UNDER PRESSURE
As such Topps Tiles warned it expects to see an ‘impact on sales’ during the period of tighter restrictions, and that trading margins ‘will come under some pressure’ due to the additional delivery costs associated with higher levels of online sales.
The company also warned its commercial arm - which has a customer base that includes the likes of architects and designers - is seeing a more protracted recovery, but insisted performance in the division is ‘in line with our plans’ and that it remains ‘committed to disrupting the commercial market and constructing a market leader over the medium term.’
Topps Tiles intends to build up a significant business in the commercial sector - which reportedly accounts for 45% of UK tile sales - over the next few years, with the market notably fragmented.
BALANCE SHEET STRONGER THAN FIRST LOCKDOWN
The company also gave an update on its balance sheet and said it is now in a ‘fundamentally stronger position’ compared to the first national lockdown, with the firm now debt-free.
As at 26 December 2020, adjusted net cash was £28.5 million, and the company repaid a £5 million term loan drawn as part of the Coronavirus Large Business Interruption Loan Scheme, and cancelled an unused £5 million revolving credit facility under the same scheme.
Despite the pressures of the pandemic, chief executive Rob Parker insisted the firm’s goal of accounting for £1 in every £5 spent on tiles and associated products in the UK by 2025, thereby increasing its market share to 20% from 17% at present, remains on track.
He said, ‘While the latest lockdown restrictions will impact sales, at this stage it is very difficult to estimate the level of impact or how long this may last. The business remains well funded, is debt free, has a market leading offer and a clear strategic focus on achieving our goal of '1 in 5 by 2025'.
‘The combination of these factors gives me confidence that Topps is well-positioned for growth as we emerge from the restrictions of the pandemic and the economy recovers.’
