A worse than expected update from Topps Tiles led to widespread downgrades to profit forecasts as analysts voiced concern over dampened appetite for home and big-ticket purchases.
While chief executive Matt Williams said Topps Tiles has been taking market share, he expressed caution about the outlook as the retailer revealed its expectations for the first half.
Topps Tiles expects like-for-likes to increase 2.1% in the 27 weeks to April 3, after they rose 5.5% in the first quarter, implying that like-for-likes in the most recent quarter were flat. The retailer forecast that sales will climb 4.5% to £91.5m.
With like-for-like growth stalling, Investec analyst David Jeary said his pre-tax full-year profit forecast for Topps Tiles now looks “under material pressure”. Oriel Securities cut its forecast to £19.1m from £21m.
House broker KBC Peel Hunt cut its forecast from £21.2m to £16.6m. Analyst John Stevenson said: “Consumers appear to be stepping back from bigger-ticket home-related projects ahead of the election.”
The downgrades come just a few weeks after Carpetright issued a profit warning, blaming dampened consumer confidence.
Williams said: “If we thought it would be a v-shaped recovery in the economy we were wrong - it will be a bumpy road.”
He highlighted the “adverse impact of the weather in January” on Topps Tiles’ sales, but added: “It’s more than just the snow we’re talking about. The reality is sales didn’t bounce back after [the cold weather].
“Consumer confidence is definitely more subdued in the second quarter than the first.”
He said the impending general election will add to uncertainty. “Previous elections have never done us any favours,” said Williams. “The lines on which the election will be fought are concerning for the consumer. However, we’re in a better place than we were a year ago in terms of consumer confidence.”
He added that the retailer has suffered because tiles are considered a discretionary purchase. But he said: “We’re doing a good job and taking market share.”
Williams said Topps Tiles would open a “few” stores this year, but would not look at any international markets at present after pulling out of the Netherlands last year because of disappointing sales. He said the retailer’s website, which relaunched this year, was “progressing well”.
The retailer also launched an iPhone app last month as part of its aim to improve the customer offer.