Topps Tiles warns on profit as heatwave, cautious shoppers hit demand

July 1 (Reuters) - Topps Tiles warned its annual profit could drop by 29%, knocking its shares as much as 10% lower on Wednesday, as its customers bought cheaper products and extreme summer heat forced builders to temporarily stop work.

Britain's biggest tiles specialist, which has about 300 stores, has been cutting costs and closing underperforming outlets to support profitability as stretched household budgets and subdued housing activity weigh on demand.

Topps Tiles said in a statement that extreme heat had triggered temporary stoppages among housebuilders and tradespeople, and cautioned that lost activity was unlikely to be fully recovered before its financial year ends in September.

It expects adjusted pretax profit for fiscal 2026 ending September to be above £6.5 million ($8.6 million), compared with £9.2 million last year, as margins come under pressure.

"The macro-economic environment has continued to be challenging, with lower consumer spend and commercial areas such as housebuilding coming under further pressure," Topps Tiles said.

Shares in Topps Tiles were among the biggest fallers in London and were 7.5% lower at 33 pence at 0722 GMT.

The gloomy update also weighed on competitors, including kitchen supplier Howden Joinery and building materials supplier Travis Perkins, which fell 1.5% and 2%, respectively.

Topps Tiles reported a 1.8% drop in third-quarter revenue to £75.6 million, including specialist tile business CTD which it acquired last year.

"While weather is arguably a one-off hit, the weaker consumer sentiment and increased participation of lower priced product is unlikely to change in the short term and so we have reduced our sales and margin assumptions for the outer years as well," Peel Hunt analysts said in a note.    

($1 = 0.7555 pounds) 

(Reporting by Amna Mariyam and Neeshita Beura in Bengaluru; Writing by Yadarisa Shabong; Editing by Subhranshu Sahu, Harikrishnan Nair and Alexander Smith)