UPDATE 1-British housing recovery boosts Topps Tiles sales

Tue Jan 7, 2014 5:53am EST

By Neil Maidment

LONDON Jan 7 (Reuters) - Topps Tiles, Britain's largest specialist tile retailer, said an improving economy and housing market had spurred a better-than-expected start to its fiscal year.

The company's profits have fallen by almost two-thirds since 2007 as low consumer confidence and a constricted housing market weighed on sales, but it said on Tuesday the landscape was improving.

"The market is certainly helping us, in terms of house price, housing transactions, and consumer confidence," Chief Executive Matthew Williams told Reuters, adding sales had also benefited from improvements to its stores and products.

Britain's economy enjoyed some of the fastest growth of any major industrialised economy in the first nine months of 2013.

Data on Friday also showed British lenders approved the highest number of mortgages in more than five years in November, with the housing market bolstered by falling unemployment, low interest rates and government mortgage schemes.

After posting its first rise in adjusted pretax profit since 2007 in November, Topps Tiles said on Tuesday that sales at stores open over a year rose 9.3 percent in the first 13 weeks of its financial year, to Dec. 28 - ahead of analysts' forecasts for a 6-7 percent increase.

The group, which has 328 stores and also sells flooring, said trading in the period had been boosted by a near-record week of sales in November, as well as seasonal demand lasting much further into December than in previous years.

"This is all about people building towards showing off their homes at Christmas," Williams said. "Every year you see a drop off just before Christmas but what happened this year was we really held on right until the last minute, so people were doing jobs right up until the relatives coming round."

Williams said that while he had been encouraged by first-quarter trading, it was too early to say if it could be maintained across the whole year.

Shares in Topps Tiles, which have more than doubled in the past year, were trading up 1 percent at 130.25 pence at 1044 GMT, against a 0.3 percent rise in the FTSE All Share index - valuing the firm at about 250 million pounds ($410 million).

Rising consumer confidence levels had led to hopes of a good Christmas for Britain's retailers but results have so far been varied from very strong at Next to a profit warning from Debenhams.

Last week, Next - Britain's No.2 clothing retailer - forecast a steady improvement in the economy but said a lack of growth in household incomes meant there was no reason to expect a significant increase in consumer spending in 2014.