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Topps Tiles share price has dropped through the floor this week, plunging to an all-time low after the firm issued a profit warning.
The tiling giant lost 20 per cent from its share price, which is now standing at 56.96p, following the news that its profits were likely to be at the bottom end of market expectations.
The brand had faced turbulent times in the past couple of years – over the past five years, for example, its stock was down 38 per cent, but it had made some hard won share price progress following the General Election and renewed investor confidence in the housing market. This latest profit warning however, which revealed that full-year profit will be below current city expectations of between £13.5 to £14.5 million, has wiped out the recent gains.
The home retail giant announced a 5.4 per cent drop in like-for-like sales in its first quarter, the period up until 28 December, and then a 5.5 per cent drop in like for like sales so far in the second.
So, could the current share price be a bargain buy or does the flooring specialist have further to fall?
Topps has historically been the market leader for tiles, with a third of the UK domestic tile market and 361 retail stores. The firm had also tried to address faltering consumer confidence with the rollout of a new commercial division, which achieved revenues of about £5 million in its most recent financial year.
Some analysts are concerned about this recent profit warning though – while Peel-Hunt reiterated its ‘buy’ rating, Liberium slashed its target price from 80p to 65p saying:” Housing transactions showed a marked step-up in January, but whether this becomes a trend is, as yet, unknown and given the typical 6-9 months lag to any RMI pick-up, we have set forecasts prudently.”
Chief Executive, Rob Parker, said in his statement that “Trading conditions in our second quarter have remained challenging, reflecting continued weakness in home improvement spending.”
It is undoubtedly still a tough time for retailers – even Dunelm, the success story of the home improvement sector of late, has seen its shares fall 20 per cent since mid-February.
On a positive front for investors, house prices have returned to their pre-financial crash levels, but Parker warned he did not expect Topps would see any benefit from these “until the second half of the year.”
Parker went on to say that the firm would cut costs and boost cashflow in response to the setbacks and stated his confidence in Topps Tiles “market-leading retail offer and recently established commercial operations” to deliver long-term growth. Whether that will be enough to appease investors after this share price crash remains to be seen.
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