With news of UK consumer spending being at a seven year low, this would not seem to bode well for sellers of high ticket items like a new kitchen. However, Howden Joinery (HWDN), a kitchen supplier, has released figures challenging that assumption.

For the 16 weeks to 21 April, the company’s UK revenues grew by 14.8% on a year-on-year basis. Sales growth has increased by 12.5% since the start of March.

Investors have reacted positively, the company’s shares up 4.1% to 499.8p.

Howden Joinery Group  HWDN    Share Price   Shares Magazine

However, Michael Mitchell, analyst at Davy Research, says the major driver of the growth is a poor comparative period. This is something that Howdens’ management is aware of, saying it will ‘note the tougher comparatives from the prior year as the year progresses’.

UK'S LARGEST

Howdens is the UK’s largest manufacturer and supplier of fitted kitchens although unusually refuses to sell to the public direct. The customer has to find a trade professional who will then fit the kitchen, although Howdens does have a list of preferred tradesman.

In the tough repair, maintenance and improvement (RMI) market in the UK, Howdens model is clearly working. The company offers a broad range of products which are available quickly through their incentivised local depot managers.

Although Howdens has only opened three new depots so far this year, it is planning to open a further 30 depots by year-end. The sales growth is coming from volume as the management did not put through any price increases until April, increasing premises is a sure way of driving up volume.

PERFORMANCE

As a stock, it had a good performance in 2017, appreciating 22%. Using broker Peel Hunt’s forecasts, Howdens trades on 15.4-times 2018’s earnings. It also has a net cash position of £241.1m which it has been using to buy back stock.

The company is doing well in uncertain times although management ‘remain watchful of market conditions’.

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Issue Date: 02 May 2018