Kitchens-to-doors supplier Howden Joinery (HWDN) enjoyed a strong trading performance between 12 June and 28 October as sales rose 8.2% compared to the same period last year.
Shares in Howden have surged 6.7% to 439.9p as it bucked the trend of profit warnings among companies supplying big-ticket products.
The company says the jump in sales was mainly driven by volume growth rather than price, although it also reflected the slower revenue growth experienced over the second half of last year.
Howden Joinery is on track to meet full year expectations. The period is 53 weeks and it is worth noting that it will incur costs of £10m in between Christmas and New Year despite generating no revenue as its depots will be closed.
‘FAVOURABLE’ SALES EXPECTATIONS
Davy Research analyst Michael Mitchell says sales growth in the second half of the year ‘compared favourably’ to his expectations. He forecasts second half revenue growth of 5.5%, including 3% from same depots and 2.5% from new ones.
Liberum’s Charlie Campbell is also optimistic about Howden’s prospects, flagging its long track record of growth and opportunity to roll-out its branch network.
‘It should continue to gain market share as it wins more business with builders and as more of the kitchen market moves to the trade channel over time,’ says Campbell.
The analyst estimates the kitchen market is running at approximately 20% below peak levels.
N+1 Singer analyst Matthew McEachran is encouraged by the positive trading performance, but is cautious that uncertainties such as declining consumer confidence and negative real wages are still threats.
Shares in Howden are up by nearly 20% since we said to buy at 368.9p in January this year. At the time we said the market had got it wrong with regards to the company's prospects and that its shares have been oversold amid fears about UK economic prospects.
