It can be said that there are few stocks and sectors outside the pharma area who can prove comprehensively that they were doing worse before the pandemic broke in March, than after. But in the case of the home improvement group Topps Tiles share price, we are looking at a company which literally delivered a profits warning at the end of February, just weeks before the COVID-19 lockdown began for the first time.
In some ways the profits warning was inevitable given the way that at the time of the Q1 update Topps Tiles said that like for like sales were down over 5%. At the time this was said to be due to political uncertainty, in the wake of the General Election, and ongoing Brexit uncertainty. Topps Tiles shares fell sharply at the time.
TPT share price pre-tax profits forecast
Rather tellingly, broker Liberum then cut its full year pre-tax profit forecast from £13.5m to £7m. Now as we approach the full year results due out on December 1, it will probably be regarded as a triumph if profits come in at anywhere near £7m. Nevertheless, the fundamental picture for the Topps Tiles share price has been far more complex, and perhaps rather better than might have been expected given the struggle reported just before the pandemic began.
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A rare retail winner in Topps Tiles shares
Something which few would have anticipated in the wake of the pandemic in March this year is that there would be some retail winners. It required even more imagination to anticipate that with consumers confined to their homes, they might consider home improvement. This would either be in order to make their immediate environment more comfortable, but also to repair the wear and tear from being at home almost all the time.
Topps Tiles share price H1 loss
In fact, things got worse before they got better, with May’s first half loss revealing a £4m deficit. This compared to a previous £5.2m profit, underlining the way that the negative pre-pandemic momentum was still very much in force. That is not to say that there were not some plus points. For instance, the cash position for Topps Tiles shares was strong at £14m, and likely to be helped by passing on the dividend. Topps also had the option of selling assets to raise further cash.
Liberum buy rating for Topps Tiles shares
Perhaps the real cue to a turnaround though, was the reopening of stores, a process complete by the early summer. This coincided with Liberum actually reinstating Topps Tiles with a buy rating, on the basis of the company’s management being proactive, and the £14m cash pile.
Perhaps the real key to fundamental improvement arrived soon after as Topps Tiles became very much a part of the furloughed workers summer staycation routine. This phenomena has never really gone away since. Indeed, it was outstanding that for the six weeks to the end of August like for like sales were up 15%.
Support for TPT shares and the TPT share price
What will be particularly interesting as we head towards the full year results in December is whether the support for Topps Tiles shares continues? This is because they have been caught up in the COVID-19 vaccine stock rotation, as investors switch from technology and growth sectors, to value and recovery.
Key in the wake of next month’s results is how much the summer recovery will counteract the initial 2020 setback? Judging by the company’s call of a fall in revenues from £219m to £192m it could very well be the case that the fall in profits to £7m is no worse than the ultimate result. Certainly, anything over £7m would be regarded very positively by investors.
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1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for Topps Tiles shares in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade
Topps Tiles share price daily chart
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