February 27, 2020 / 8:15 AM / a month ago

UPDATE 1-Topps Tiles warns on profit as Britons avoid home improvement

(Adds details, shares)

LONDON, Feb 27 (Reuters) - British tile and wood flooring retailer Topps Tiles warned on full year profit on Wednesday, blaming weak consumer spending in the home improvement sector, hammering its shares.

The group forecast that profit for its first half to March 28 will be “significantly below” the prior year level, while adjusted pretax profit for its full year to Oct. 3 will be “materially below” the bottom end of the current range of market expectations of 13.5 million pounds ($17.5 million) to 14.5 million pounds.

Topps made adjusted pretax profit of 16 million pounds in 2018-19.

Shares in the group were down 25% at the opening, while B&Q owner Kingfisher and Wickes owner Travis Perkins were down 2.4% and 1.6% respectively.

Topps said retail like-for-like sales fell 5.5% in the eight weeks to Feb. 22, having fallen 5.4% in its fiscal first quarter - a shortfall it had blamed on political and economic uncertainty in the run up to December’s election.

Analysts at Liberum cut their full year profit forecast by about 50% to 7 million pounds and shifted their recommendation from ‘buy’ to ‘hold’.

Chief executive Rob Parker said in a statement that the company would reduce costs to remain competitive.

“While UK housing market indicators have shown an encouraging improvement in the period since the general election, these traditionally have a lagged impact on our trading and we would not expect to see any benefit from these until later into the second half,” he said.

Topps’ update countered official UK retail sales data published last week which showed that British shoppers started spending again at the start of the year after a sluggish end to 2019.

$1 = 0.7696 pounds Reporting by James Davey; editing by Sarah Young

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