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Well I know that the "high enders" still exist in my neck of the woods and I certainly dont't live in "... an area with higher than average property values and with affluent residents ...", quite the reverse.
The real world has moved on since the start of the new millennium. Those high enders used to exist before the web stole their shirts. They closed up, the distributors who supplied them have also gone. Please don't get abusive about what I know, you'd be really surprised. If you think that shoppers go to TPT stores to find cheaper alternatives to some elite store, you are very much mistaken.
I'd beg to differ. I know of several niche, local retailers in my area alone who cater to the higher end of the market (and if they exist in my area of the world I assure you that they will definitely exist in yours too). They are there if you just care to bother to go to look (but it does mean that you'll have to get up from your computer and go out into the real world).
Who are these mythical high end retailers?
In the majority of town and cities, they simply don't exist. TPT are in direct competition with the DIY majors, in general they are cheaper, online cheaper still, independent tile specialists, competitive because they source direct from factories and move the stock less than TPT. In addition to the major online folks you listed, there are numerous others, it's so cheap to have an online presence. One of them offers direct from the factory pricing, bordering illegality but who polices the online space? No, I'm not naive in any way, the industry is harsh and demanding, as are the customers. It's widely recognised that UK isn't as prosperous as it was, so I believe more changes will follow
Relative to the price of tiles in speciality, high end, tile stores they are cheap. It's all relative.
You really do need to expand your narrow mindedness. When I said "pile 'em high, sell them cheap" you clearly didn't follow my drift. "Pile 'em high" = large volumes plus supplier volume discounts. "Sell 'em cheap" = relative to up-market, local, niche, low volume retailers.
Unlike you (obviously) a lot people are quite finicky about the tiles they buy. It's often a large outlay, so they like to touch them, feel them, compare patterns, matxh them with other fittings, compare them in different light etc. etc. That's hard to do online. This is exactly the same problem Amazon encountered and why they were forced to open bricks and mortar shops in the US after they'd driven all of the natural bricks and mortar competition to the wall. We all have different views on online vs bricks and mortar but one shouldn't just simply ignore the actions of one of the largest online retailers on the planet and simply persevere with the unproven view that bricks and mortar are dead. Don't be so naive.
You're displaying a bit of naivety, I wonder if you've actually been in their stores. No piling high, and most certainly no selling cheap. Their prices are higher than a giraffe's tush.
Slick presentation and ultra pushy sales staff is their style, but competitive they aint.
Alfista, As I said in a previous post, TPT regularly reviews its store network and closes/downsizes where appropriate.
Have you also considered whether TPT's offering is something that might actually appeal in an area with "with higher than average property values and with affluent residents". TPT has always tended to offer a standardised line of products across all of its stores (it doesn't tend to change its product offering to meet specific local market demand) which means it has to carry fewer product lines and can maximise both volumes and supplier volume-based discounts.
I wouldn't be at all surpised to find more local, niche, up-market tile retailers trading in more affluent areas rather than "pile 'em high, sell them cheap retailers" if you follow my drift. I'm not disparaging TPT's products but its sales model has always been based on selling high volume, low/average value tiles rather than low volume, high value tiles.
I suggest that you have a wander around said Midlands town and tell me if I'm wrong.
You do try ever so hard don't you.
Take their branch in a well to do midlands town as an example. Downsized twice, then closed. In an area with higher than average property values and with affluent residents.
Doesn't quite chime with your rosy outlook does it ?
Maybe classic shops will win the battle for shoppers. If so, happy days. Can't see it myself though.
Alfista, What do you want? If you want to sell tiles then you are going to incur cost of sales and, the more tiles you sell, the higher your cost of sales will be (you can't sell and incur zero costs)! TPT may have the highest cost of sales (£s) but it also has the highest sales (£s) and gross margin (%), so go figure!
Rent, rates, heat and light are not just the blight of bricks and mortar retailers (online retailers do incur some of these costs too, either directly or indirectly) and you don't just throw out the baby with the bathwater (sell your stores) because there's been a general economic downturn. TPT's current trading issues aren't simply down to increased online competition; all tile retailers are suffering. Badly run businesses, like Tile Giant, will always go to the wall eventually, regardless of whether or not they are trading through bricks and mortar or online. I wouldn't be at all surprised to see both online and bricks and mortar retailers going to the wall in the coming year but TPT is one of the strongest tile retailers in the market and there's no current reason to think that it will be amongst those failing businesses.
As Amazon has clearly proven, online cannot prosper without bricks and mortar (Amazon drove bricks and mortar retailers to the wall in the US but then had to open its own bricks and mortar outlets because customers still wanted to touch, view and compare before they bought big ticket items) Some bricks and mortar retailers will flounder but some will survive and I expect TPT not only to survive but prosper (I wouldn't be too surprised to see TPT expanding its own, existing online retail offering through ProTiler is due course).
Dessertstar, When was the last time TPT made £40m+ profits? Not in the last 15+ years! In part it's poor profits performance since 2008 is due to the c£100m debt it took on to purchase its own shares in c2006; that additional financing cost weighed down the profits performance for over a decade (which explained the poor share performance and the collapse in the share price) but that debt has now been repaid. Margins are lower than they have been historically due to the impact of Covid and input price inflation (these factors have affected all tile retailers not just TPT) but TPT is now in the process of rebuilding its margins, as outlined in its FY23 results and the recent H1 trading update. Whether gross margins can be increased back to 60%+ remains to be seen. There's no doubt that increased online competition will continue to apply pressure to TPT's gross margins (there's only so far that volume discounts from suppliers can take you) and I think that mid to high 50s, rather than low 50s, is a more realistic expectation. Online competitors will want to take market share from TPT but they won't want to drive it out of business because they are able to piggy back their own sales off its bricks and mortar outlets (think Amazon).
TheTrotsky,
I'm not sure that assumption is correct as Topps also sell adhesives and ancillary products. As far as I know it was just 1 in 5 of the tile market including adhesives etc.
Whatisgoingon, I accept that management bonus schemes should always be kept under review but the 1:5 target is, I believe, soley in reference to tiles and ProTiler doesn't sell tiles (it sells ancillary products). Most, if not all, of the growth in tile sales have been through organic growth.
As far as the consumer was aware, TG didn't collapse, but they are indicative of the difficulty bricks and mortar retail faces. .
Costs aren' decreasing, only one way they'll go. Online sets the price expectation, and is hard to counter IMHO
I hope the positive people ok here are proven right and the second half of this year does not get worse for toppstiles , I stand by my comment that they need some fresh changes at management level even if it’s additions … This company in its best years was making 40m plus profits per year and last 10 years it’s not moved and my concern is the share price for the last 2 years has not been great.
I also expected Topps to take market share from Tile Giant after its collapse but I guess their former CEO who now owns Tile Giant is doing a better Job and growing sales there ….
I agree 100% with dessertstars view on Management Share Schemes.
In order to hit their target of 1 in 5, they simply bought other businesses.
Where the strategy used to be "profitable market share" the word profitable didn't matter to them in this case.
Scandalous really that they can make huge bonuses in this way.
Cost of a couple of warehouses compared to more than 300 stores?
Rents, rates, heat and light, staffing, insurance, servicing and merchandising.
Certainly there is no dispute that TPT is by far the biggest when it comes to cost of sales. Market leader.
"Online giants". There may be large online tile sellers but TPT is the largest UK tile seller and has been increasing its market share. Which "giants" are you specifically referring to? I've checked out the latest available accounts of Tile Mountain, Total Tiles and Tiles Direct at Companies House and they don't bear comparison to TPT. The sales of the largest, Tile Mountain, are only c30-35% of TPT's, whilst the others are just a fraction of that. Also, their gross margins, operating margins and net cash are all worse.
I'm not sure why you would say selling the main warehouse would necessarily increase fixed costs. There are benefits to having a de-centralised warehouse network e.g. it allows you to better cater to a wider geographic market, more nimbly supply stores/customers and, potentially, in smaller volumes (your're not gong to send a transit van from, say, London to Falkirk to just meet one relatively small order but you might send one from, say, Glasgow), it more readily enables you to increase your warehouse capacity (expanding one central warehouse can disrupt the whole business). I would also suspect that a lot of the competition don't just operate from one main warehouse either; so it's not necessarily going to put you at a competitive disadvantage.
Discounting does not equate to profits e.g. if you (say) sell £1m of tiles at a gross margin of (say) 40% and drop your prices by (say) 10% then you'd have to increase your sales by a third to achieve the same level of gross margin (£s). Discounting in the current environment would more likely result in an increased cash burn.
Shareholders weren't against the "Polish outfit" acquiring TPT per se; they were againts them acquiring TPT at undervalue or, worse still, just diverting profits from TPT to themselves (by forcing TPT to source 30% of their tiles from them at a price dictated by them).
Despite what you say, TPT is a succesful operation and in the current environment all tile sellers are suffering. Selling tiles through bricks and mortar has been successful for TPT in th past and the current market environment does not vindicate selling online over bricks and mortar in the long term. That may change but currently the TPT model works and I feel sure that TPT will come out of this current economic turmoil stronger as the more marginal, often loss-making, operators, both bricks and mortar and online, are pushed to the wall.
Fresh new management? TPT has expanded its sales and sucessfully moved online over the last two financial years. We now have an economic environment that is affecting all tile retailers (if any tile sellers are increasing sales in the current market environment it's likely at the cost of margins, profits and cash; and none of the large online retailers have the cash resources to throw money away) and you want to blame management?!
Very interesting debate I’m a newcomer here and only commenting after being frustrated with the latest results of a company I hold shares in .. I’ve visited Topps stores and their main competitors and have to honestly say Topps are in a better shape and what may help them is the demise of others , however I’m not happy with management few reasons
1. They panicked and sold their main warehouse during covid and now facing increased fixed costs
2. The parkside they should just cut losses and move on I cannot see why they think anything will change after 4 years
3 management share schemes all based around market share targets like 1 in 5 that can’t be proved and more importantly give no value to us the shareholders it shouod be based on straight forward profitability and share price growth
Also Topps don’t have an answer the online players like total tiles , tile mountain and so many others just go and compare the prices …
Topps needs fresh new management in my opinion otherwise that cash on balance sheet will soon disappear
Gobsmacked.
Are you really not aware of the online giants, their turnover and market share?
As for discounting, that's what they do, seriously aggressively, as do lots of warehouse/showroom outfits. Weakness of the whole industry, massive amount of factories/brands/selling agents, all looking for a slice of the UK action. TPT can't control that, but there are groups big and strong enough to do what the Polish outfit attempted, acquire the company, strip out the deadwood, and major on their own group offerings.
Only time will tell
Seriously? You think the last 12-18 months are worse than the 2008 financial crash? TPT has been here before. Recessions and interest rate rises/falls are nothing new (the benign interest rate background of the last 10-15 years hasn't completely prevented the normal cyclical movements). You're talking as if the world has come to an end. It hasn't. I'm saying TPT is financially strong (stronger than it has been for over 20 years) and is very well placed to withstand the current economic/cyclical headwinds.
Management can't force customers through the doors (mass discounting in this environment would be a perilous course of action; any potential increase in sales would unlikely offset the fall in gross profits). Management aren't stupid. Whilst the market and the economy in general are in the tank, they will manage their cost inputs as best they can. Interest rates are now likely to start falling later this year, all other factors being equal and it's likely that the tiles market will start to pick up again in FY25, again all other factor being equal, as mortgage concerns start to diminish and the housing market starts to pick up.
The economy and interest rates aren't really a threat to financially strong bricks and mortar retailers in the medium/long term (this cycle might be worse than some some but not as bad as others); the potential movement to online retailing is and, as far as I'm aware, there does not appear to be any significant movement to online tile retailing at this juncture (the ancillaries are another matter and TPT has already got that covered off by ProTiler).
As regards, "... multiple failed businesses in the sector, this year alone ..." nobody is denying financially weak businesses go to the wall in recessions like this but my point is what specific reason do you have to believe that the largest UK tile retailer with c£25m of net cash and access to c£53m of undrawn committed credit facilities is currently at risk? There was nothing unexpected in the last RNS given the current economic backdrop. Growth at ProTiler may be cross-subsidising declines in LfL sales at Topps Tile at this present moment in time but that's a perfectly legitimate management decision if the market is expected to start rebounding again over the next 6-24 months. You might decide to prune some of your stores (something TPT regularly reviews) but you wouldn't shut them down wholesale simply because of a short/medium term "blip".
Despite what some people think, bricks and mortar aren't dead. Even the largest online retailer, Amazon, is expanding its bricks and mortar presence! The death of bricks and mortar is as much heralded as the death of paper with the advent of the PC; it never happened (indeed we probably use more paper now than we did before the advent of the PC).
Don't tell me I don't know the economics of the industry, you simply don't have a clue how much I know. Enough to have witnessed multiple failed businesses in the sector, this year alone has seen many, with others cr4eaking along on the brink.
You haven't factored in the impact of 14 interest rises in a row, after such a long period of virtually zero bas rates. Household are witnessing a costs shock unlike any in more than a generation, meanwhile they witness the tax take ever rising to pay the benefits bill.
The weakness of having to fund more than 300 piles of bricks and mortar should not be glossed over. Will the good times return when the next government increase spending with money they don't have? I know what I think, but then you know better of course.
Caveat emptor.
Last sentence should have read:
The tiles business, like the economy, is cyclical and this is not TPT's first rodeo!
Piffle, you clearly don't understand the company or its operating metrics, and have no appreciation of the current wider economic backdrop. To suggest that more funds are outflowing than inflowing, the acquisition of the remaining minority interest in ProTiler aside, based simply on the fact that sales have fallen (whilst gross margins have risen) is just unproven conjecture. They say that net profits have been impacted; they don't say that profits have become losses. Also, H2 always tends to be more profitable than H1 because of the lower operating costs (in particular, the unwind of the accrued holiday provision and lower utility costs).
Cash wise, TPT had net cash of c£25m at 30 Septmebre 2023 and headroom of ~£53m in its committed borrowing facilities. In my recollection, this is probably the strongest financial position TPT been in for over 20 years. Acquiring the remaining minority interest in ProTile will probably cost TPT c£8m and there is probably scope for further complimentary acquisitions if the opportunity arises (it's unlikely that TPT would be permitted to acquire another large, tile business in the UK because of its existing share of the UK tile market).
ProTiler does not sell tiles and its operating margins are akin to Topps Tiles; TPT would therefore be fairly ambivalent as to whether Topps Tiles loses some sales to ProTiler. It probably means that Topps Tiles will, over time, have to hold less tiling tools, cutters, trim etc. stocks in store, can potentially charge a higher mark-up on said items in store (the opportunity cost of the customer not having bought enough in advance online and having to make additional purchases in store at short notice) and, over the longer term, can use the additional space created in store to potentially increase its tile range (the vast majority of tiles sale still continue to be supplied through bricks and mortar outlets).
Given that there was an already existing trend to purchase tiling tools, cutters, trim etc. online, the acquisition of ProTiler has actually complimented Topps Tiles rather than detracted from it; it's far better for Topps Tiles to lose sales to ProTiler rather than another competing, third party, online retailer. Topps Tiles might have tried to create its own online presence but that would have been costly and time consuming. The acquisition of ProTiler may ultimately cost c£13m but I think it will probably prove to be money very well spent. Not only did TPT hit the ground running from day one with an established online brand but it's been able to leverage its existing purchasing power. Plus, the initial ROI following the aqcuisition of the remaining minority interest is likely to be c15% and rising.
The bizarre thing is that TPT's earnings per share fro FY24 will still probably be higher than FY23, despite its falling tile sales, because of the vagaries of minority interest accounting.
The tiles business, like the economy, is cyclical and this is not TPT's
More funds outflowing, less funds inflowing.
Caution required.
As online continues to bite big chunks out of the market, being "well placed for a recovery" relies solely on being there at all for a recovery. Confidence in property buying is very low. Nobody like the direction the government is taking the country, and they're already terrified by what the next government will do.
A glum outlook IMHO
Topps tiles disappoints again , current trading not looking good and don’t understand why they keep talking about pro tiler according to their own managers Topps stores are loosing sales to pro tiler website … todays release focussed so much on customer service score reality is that as a shareholder I want to see a path to decent share price growth can’t see it coming anytime soon
Bad news in rns today.