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Topps Tiles – ‘continue to make good progress with our core strategy’, so why continuing share price decline?

By Steve Moore | Thursday 5 July 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Shares in Topps Tiles (TPT) are currently further lower following a recent Q3 trading update – despite it arguing it continues “to make good progress with our core strategy of ‘Out-Specialising the Specialists’ to extend our market leading position in the UK tile market”. Hmmm…

A “weaker consumer environment” is though also noted – with like-for-like revenues down by an increased 2.3%, despite also a -4.7% comparative from the corresponding quarter last year.

CEO Matthew Williams argues “we have approximately doubled the size of our addressable market through our expansion into the commercial tile market segment and are focused on leveraging our specialism and competitive advantage across both retail and commercial channels”.

However, I previously noted broker to the company Liberum has reduced earnings and dividend forecasts by circa 8% for the current year and two following - now looking for 6.2p and 3.1p respectively for the current full-year. These compare to 7.6p and 3.4p delivered last year and 8.9p, 3.5p the year before that.

Those now compare to 5.9p and 3p presently forecast. The broker argues the company’s “leading, specialist market position leaves it better placed than competitors to weather the storm and the group's longer-term growth prospects, including within the UK commercial tile sector, remain intact”. However, it also admits current “market conditions are tough and the outlook remains uncertain”. I currently continue to avoid.

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