Topps Tiles has suffered a sharp drop in full-year profits as it pressed ahead with investments in its store network and Parkside commercial division.
The flooring specialist said statutory pre-tax profit fell 25.3% to £12.7m during the 52 weeks to September 29. Like-for-likes were flat compared to a decline of 2.9% last year.
Total sales grew 2.4% to £216.9m, but Topps invested £1.5m into the opening of nine new stores, £1.8m into its store improvement programme and a further £1.1m into its burgeoning commercial business.
However, Parkside booked a trading loss of £1.1m during the year, although Topps said this performance was “expected”.
Gross margins across the group remained broadly flat at an “industry leading” 61.3%, as a result of sourcing gains.
Boss Matthew Williams hailed the 12 months as “an important year of strategic progress” for the business following its expansion into commercial.
But he warned trading conditions “remain challenging”, with like-for-likes falling 1.9% in the first eight weeks of its new fiscal year.
Williams said: “Against a challenging market backdrop, the group delivered a robust trading performance for the year with flat like-for-like sales and market-leading gross margins in retail, and the foundations laid for significant sales growth in commercial in the year ahead.
“At the start of the new financial year, trading conditions remain challenging and like-for-like sales in the first eight weeks have been negative against a strong prior year comparator.
“Whilst retaining a cautious view on the outlook, we remain confident that our expansion into the commercial tile market, coupled with our market-leading retail operation, gives us a solid platform for future growth.”
Despite the like-for-like decline at the start of its new fiscal year, Topps insisted its strategy of ‘out-specialising the specialists’, focusing on customer service, ranges and digital expertise was reaping rewards.
The retailer said “almost all” of its customers visit one of its 368 stores as a result of its “specialist service” proposition.
But Topps admitted that it would “continue to review the efficiency” of its store portfolio in a bid to “respond to changing customer needs over time”.
The business said it has a “high degree of flexibility” within its store estate, with an average lease expiry of 3.4 years.