Topps Tiles profits slump as it warns of cost pressures due to wage bill rises

The flooring specialist reported underlying pre-tax profits of £6.3m for the year to September 28, down from £12.5m the previous year, as same-store sales slumped 9.1%

Topps Tiles has reported a significant drop in profits, with figures nearly halving over the past year amid a challenging home improvement market.

The company also issued a warning about "significant" cost pressures looming in 2025, ahead of new Budget measures. The flooring specialist's underlying pre-tax profits plummeted to £6.3m for the year ending September 28, a stark contrast to the £12.5m earned the previous year, as same-store sales fell by 9.1%.

Despite a slight uptick in sales in the first eight weeks of the new financial year, up 1.2% excluding the recent acquisition CTD, comparable store sales were still down by 0.4%. Topps Tiles is bracing for a tough 2025, with the Budget measures expected to add an extra £4m to its wage bill due to the National Insurance Contribution (NIC) increase and the rise in the minimum wage from next April, approximately £2m of which will impact the 2024-25 period.

Alongside general inflation, the company anticipates overall costs to surge by around £5m. The group stated: "There remain significant inflationary challenges facing the business in 2024-25.

“Given these cost increases represent a high proportion of the current level of profitability in the group, they will need to be managed very carefully, and the business is currently formulating plans to mitigate these costs as far as possible.”

Additionally, Topps Tiles highlighted the uncertain outlook for consumer spending and the home improvement market.

The company stated: "Whilst some macroeconomic indicators suggest a more favourable outlook into 2024-25, including mortgage approvals up substantially year on year, overall there remains significant uncertainty around the timing of any recovery, particularly whilst consumer confidence remains weak and interest rates relatively high."

It also revealed that it was hit by "substantially weaker customer demand". The results showed that on a statutory basis, it slumped to a £16.2m annual pre-tax loss from profits of £6.8m the previous year.