Topps Tiles — More challenging outlook

Topps Tiles has continued its market outperformance but saw a softening of trading in Q226, notably in the Topps Tiles stores. As the conflict in the Middle East, which began towards the period end, is likely to suppress consumer confidence and raise existing inflationary cost pressures even further, management is undertaking a series of self-help measures to mitigate what is likely to be a more challenging environment. One such initiative is the closure of 23 underperforming Topps Tiles stores, about 8% of the FY25 base, over the next 12 months, which management expects will improve overall profitability. With the more challenging environment apparent, we take a more cautious stance on the outlook for revenue growth in FY26, which leads to a 21% reduction in our PBT forecast, and a reduction of our FY27 estimate.