Topps Tiles reported a deterioration in recent trading as shoppers put off renovating their homes amid the stagnation in the housing market.
The UK’s largest tile and wood flooring specialist, which operates 321 stores, said like-for-like sales fell 6.9 per cent in the seven weeks since the end of September.
They were down by two per cent over the previous financial year.
Topps said it expects conditions to remain difficult in 2012 as the spending power of shoppers continues to be squeezed.
In addition the weak housing market is deterring people from making home improvements and fears of a double-dip recession are persuading shoppers to delay purchasing expensive items.
The group, which said it has the potential to grow to 400 stores, reported a 15 per cent fall in underlying profits to £13.9m in the year to October 1 as it battled “very challenging trading conditions”, particularly in its second-half.
Full-year results were slightly ahead of the guidance given by the company following a profits warning at the end of August.
With the recent fall in sales demonstrating the “fragility of UK consumer confidence”, Topps slashed its dividend by 40 per cent to 0.6p.
It said its share of the tiles market increased from 25 per cent to 26 per cent.
Its market share was boosted by the opening of nine new stores over the year.
Analysts expressed fears about the impact of expansion by the big DIY chains.
Kate Calvert, an analyst at Seymour Pierce, said: “We still expect the housing market to remain subdued and sales elusive, while the specialists are seeing increasing competition from the home stores being developed by the multiples and DIY.”
Despite the sales pressure, the group’s gross margin improved slightly.
This was partly due to the conversion of some of its Tile Clearing House outlets to its more profitable Topps Tiles format, which also made efficiency savings in its supply chain.
David Jeary, an analyst at Investec Securities, said he planned to keep his profits forecast unchanged at £13m for the current financial year.
Topps plans to open five new stores over the next 12 months as part of its “cautious expansion approach”.