Some of the shine was taken off a strong profit performance by Topps Tiles after the company revealed that sales had fallen in recent weeks.

The Cheshire-based company, the country's biggest tile and wood flooring specialist that also trades under the Tile Clearing House brand, said like-for-like sales fell by 4.7 per cent in the first seven weeks of the current financial year, and it described trading conditions as volatile.

"The fundamentals are still there, but people are putting things on hold a bit," chief executive Nick Ounstead said. "There is no doubt that we, along with the rest of the UK retail sector, are experiencing a very tough trading environment."

Analyst Richard Ratner at Seymour Pierce said Topps was doing better than most of its peers and called it "the quality play in this sub-sector".

But Nick Bubb at Evolution Securities said the market might be disappointed by the dividend of 9.5p a share declared yesterday.

"This is a growth stock, and we're used to seeing double figures," he said. "But it's not as bad as B&Q or Homebase."

Pretax profit for the year to October 1 rose by 16 per cent to £39.2 million on sales ten per cent ahead at £173.3 million.

During the year the group opened 20 new Topps outlets and a further four Tile Clearing House units.

It also bought back more than 1.7 million shares at a cost of £3.77 million - mainly with the aim of preventing dilution of the stock as employee share options are exercised and sold.

Mr Ounstead said Topps was focusing on improving the margins and cutting costs, but he ruled out any immediate job cuts and said the company's growth rate of 24 stores a year would continue.

"Given the strength of these results, we believe we have the right business model and the best people to continue to gain market share.

"Historically, the group's business has proven to be resilient in the face of economic downturn."