Topps Tiles bucks retail trend as it opens new UK stores

LONDON Thu Feb 7, 2013 6:14am EST

LONDON Feb 7 (Reuters) - While bulging store estates are being blamed for the death of many British firms in a new digital age, Topps Tiles is adding outlets as it targets greater market share in its niche retail sector.

The UK tile and flooring firm expects to open eight stores this financial year, to add to the 322 it currently operates. It is also relocating and refurbishing existing ones, and believes it could expand to between 350 and 400 in the longer term.

"Bricks and mortar is alive and well with us," Topps Tiles chief executive Matt Williams told Reuters. "Stores are still really important for us if we are to take market share."

While many British retailers are clambering to swap some stores for fast-growing sales online, Topps Tiles has used its website more as a window for its products.

Over 70 percent of people go online before coming in-store, but only 2 percent of group revenue comes from actual online sales. Many increasingly choose a click and collect service that requires more stores in more locations.

Topps' profits have fallen heavily during the downturn, from 28 million pounds pretax in 2008 to 12.5 million in 2012, as tight economic conditions and a constricted housing market - home buyers are key Topps Tiles clients - weighed on sales.

However, the company says its core product focus and customer service is helping it take sales from struggling independent firms, as well as home improvement rivals, which include B&Q and Homebase. Topps now has 27 percent of the market, it says.

"Although it is a flat market, it is a market moving in our favour. We are taking from the DIY sheds and we are taking from smaller specialists as they go against the wall," Williams said.

A first quarter trading update, released in January, showed the firm grew like-for-like revenues by 1.6 percent in the 13 weeks to Dec. 29, up from a 4.2 percent decline a year earlier.

Improved products and a marketing drive have helped draw in cost-conscious clients willing to spend more on a one-time job and more adventurous designs. Trade customers are also expected to grow from 40 to 45 percent of sales this fiscal year.

In London, where the housing market is relatively healthy and the group has a strong presence with around 70 stores, Williams said there was potential to double its numbers.

Recent data has pointed to Britain's central bank's Funding for Lending Scheme starting to boost home buyers, with loan approvals for house purchases in December at their highest level since January 2012.

Shares in Topps Tiles have gained 60 percent on a year ago, and opened on Thursday at 55 pence. The group is expected on average to post a full-year profit of 13.9 million pounds.