Topps Tiles bucks retail trend as it opens new UK stores

By Neil Maidment

LONDON, Feb 7 (Reuters) - While bulging store estates arebeing blamed for the death of many British firms in a newdigital age, Topps Tiles is adding outlets as it targetsgreater market share in its niche retail sector.

The UK tile and flooring firm expects to open eight storesthis financial year, to add to the 322 it currently operates. Itis also relocating and refurbishing existing ones, and believesit could expand to between 350 and 400 in the longer term.

"Bricks and mortar is alive and well with us," Topps Tileschief executive Matt Williams told Reuters. "Stores are stillreally important for us if we are to take market share."

While many British retailers are clambering to swap somestores for fast-growing sales online, Topps Tiles has used itswebsite more as a window for its products.

Over 70 percent of people go online before coming in-store,but only 2 percent of group revenue comes from actual onlinesales. Many increasingly choose a click and collect service thatrequires more stores in more locations.

Topps' profits have fallen heavily during the downturn, from28 million pounds pretax in 2008 to 12.5 million in 2012, astight economic conditions and a constricted housing market -home buyers are key Topps Tiles clients - weighed on sales.

However, the company says its core product focus andcustomer service is helping it take sales from strugglingindependent firms, as well as home improvement rivals, whichinclude B&Q and Homebase. Topps now has 27percent of the market, it says.

"Although it is a flat market, it is a market moving in ourfavour. We are taking from the DIY sheds and we are taking fromsmaller specialists as they go against the wall," Williams said.

A first quarter trading update, released in January, showedthe firm grew like-for-like revenues by 1.6 percent in the 13weeks to Dec. 29, up from a 4.2 percent decline a year earlier.

Improved products and a marketing drive have helped draw incost-conscious clients willing to spend more on a one-time joband more adventurous designs. Trade customers are also expectedto grow from 40 to 45 percent of sales this fiscal year.

In London, where the housing market is relatively healthyand the group has a strong presence with around 70 stores,Williams said there was potential to double its numbers.

Recent data has pointed to Britain's central bank's Fundingfor Lending Scheme starting to boost home buyers, with loanapprovals for house purchases in December at their highest levelsince January 2012.

Shares in Topps Tiles have gained 60 percent on a year ago,and opened on Thursday at 55 pence. The group is expected onaverage to post a full-year profit of 13.9 million pounds.