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Topps Tiles First Half Pre-Close Trading Update

Financial Results

Total +6.4% (£104m)
LFL +5.2%
(All results for the 26 weeks ended 28 March 2015)

Our analysis
This is an encouraging set of results from Topps Tiles, which has managed to maintain positive momentum against some particularly strong comparatives. Investment in store refreshes and range development have helped it to draw in higher footfalls, in a home improvement market which – while seeing some uplift in consumer demand – is still well below its peak earlier in the millennium.

Rising disposable incomes are beginning to bring some benefits to the DIY market, helping to drive demand from new homeowners amid an increase in housing transactions volumes, as well as consumers more generally looking to give their living spaces a facelift. However, interest in DIY as a hobby remains far below what it was, and the DIY skills of the current younger generation are not at the level of their parents, meaning that retailers are being forced to work harder to drive spend.

With this challenge in mind, we have previously noted Topps’ moves to improve its relevance and optimise its appeal. Its newer store design, especially its fledging boutique format, has a more modern and softer look with clearer merchandising, giving it a more balanced appeal to the newer generation of casual DIYers as well as trade buyers, which are becoming a vital segment as scores of young homeowners opt to use a builder rather than complete DIY tasks themselves.

To maintain this two – prolonged appeal, it has boosted its product catalogue to over 5,000 lines, to broaden its offer of finishes, while its loyalty card is being leveraged as a key weapon in driving repeat trade visits. It is being considered about expansion of its broad store estate (339 outlets); its newer and smaller boutique fascia is set to be the focus of rollout. At the same time, its online business is growing quickly (its online sales over the year were double that of 2013), and working well in tandem with its store offer around product guidance as well as booking consultancy services and store collection.

Topps is certainly outperforming the wider DIY market and is steadily on the march. A slight softening in its LFL growth compared to its 2014 full year will likely reflect some level of discounting over the festive period and we believe it is keeping up its pace of growth in purchase volumes. Even though there is some degree of uncertainty over the future scope for growth in the DIY market, Topps is tuning its proposition well to the changing nature of consumer demand. Indeed, its balanced offer remains more distinctive than specialist rivals including Travis Perkins’ Tile Giant business and pureplay Tile Mountain, and more relevant than harder DIY specialists such as B&Q.

Source: Conlumino Viewpoint 25 March 2015

March 2015

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