The UK's biggest tile and flooring firm Topps Tiles yesterday reported slowing sales and warned of the potential impact of financial market turmoil on consumers.
The Leicestershire-based firm said like-for-like sales slipped to 1.1 per cent in the seven weeks since the end of September - compared to 4.7 per cent growth in the previous 12 months - in "challenging but positive" trading conditions.
It added: "While we believe the prospects for the future growth of Topps Tiles remain broadly positive, we must not underestimate the potential impact that this year's turmoil in financial markets will ultimately have on consumers."
Pre-tax profits for the year to September 29 were three per cent lower at £37.8 million as the group paid higher interest charges on refinancing to fund a share buyback.
Topps has 321 stores including four sites in Birmingham - Erdington, Aston, Kings Heath and Sheldon - and shops in West Bromwich, Oldbury, Solihull, Tamworth, Wolverhampton and Redditch.
It increased its share of the tile market to 22 per cent over the year.
And despite the like-for-like sales sales slowdown, the company said the domestic tile market was expected to expand 15 per cent by 2011.
In addition, people in the UK take around a third of the tiles used by other Northern European countries, while the number of UK households is set to increase by almost 23 per cent in the next 20 years, the company added.
Topps achieved its target of opening a net 30 new stores over the year, bringing its total to 301 UK outlets.
The group's fledgling Dutch business meanwhile benefited from a stable market to increase its store numbers to 20 during the year. The division has seen like-for-like sales growth of 2.5 per cent in the past seven weeks, more than double the level of the UK business.
Panmure Gordon analyst Christian Koefoed-Nielsen said: "There was a slight slowdown in like-for-like sales, but Topps continues to trade well, build out the store portfolio and has developed a strongly performing business in The Netherlands as a springboard for further European expansion."
Total turnover increased 15.4 per cent to £207.9 million. Operating profit jumped to £44.3 million from £38.9 million previously. The company has 1,722 employees.
Matt Williams, chief executive said: ""We have seen a drop in footfall over the past few weeks.
"Confidence is the main problem. Higher interest rates have deterred people from moving house and taking on big projects. Instead, we are seeing a shift towards renovation and refurbishment."
He played down fears that the recent move into the tile market by Travis Perkins, one of Britain's biggest builders' merchants, could pose a threat to sales and market share.
Travis Perkins recently bought Tile Giant, which currently trades from 29 outlets in the Midlands and the North and is expected to aggressively begin rolling out the format nationwide.
Mr Williams dismissed the likelihood of a 'Tile War' breaking out between the two firms.
"We've always had competition. In the past we've had competitors with over 100 stores. That's not to say we are complacent about Tile Giant, but we feel we have the scale and ability to perform. Price is not the only driver - it's also about choice and customer service," he added.