When the housing market takes a tumble, DIY stores, furniture retailers and home furnishing shops tumble along with it. In today's contracted housing market, hampered by poor lending and property prices that have far outstripped wage increases, no one is moving. You don't move, you don't redecorate. And that's bad news for companies like Topps Tiles.
Turnover at the Leicester-based firm has dropped from £182.4m in 2010 to £175.5m this year. Chief executive Matthew Williams pins a portion of the blame on the looming recession. 'There has been relentlessly negative news,' he says. 'People may not understand the eurozone crisis but they understand bad news when they hear it.'
These full-year figures aren't actually all that bad, especially taking into account that the 2010 report comprised 53 weeks compared to 52 for 2011. But Williams will still be hoping for a surge in consumer confidence (AKA spending) to soothe investors in the next quarter. He's hardly brimming with optimism, though: 'Looking ahead, we expect economic conditions will remain difficult in 2012, with consumer budgets again under pressure.'
It's not that people aren't spending once they are in store. Far from it. Williams says that the average selling price per metre has actually risen 10% to £19. But with reduced footfall, even the increased basket size can't deliver decent profit. Pre-tax earnings are down from £12.4m to £7.91m in the year to the start of October.
What to do? Thus far, Williams has been trying to woo customers by jazzing up stores but the move has hit margins, not targets. Next year, he's trying a different tack: 'to take further cost out of the business, grow margin and maximise sales opportunities, whilst making operational improvements that will position the business for future growth as economic conditions improve.'
Either that, or the firm can diversify into roof tiles and hope for a long, stormy winter...