When the market crashed in March, share prices tumbled and the operations of some businesses ground to a halt due to the lockdown. Home improvement businesses may not have been able to envisage the demand they would encounter upon easing of restrictions.
It seems that in order to occupy themselves, a nation of home improvement enthusiasts has emerged. Since stores reopened, there has been a 42% increase in sales at household goods stores such as hardware and paint shops.
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I think Howden Joinery Group (LSE:HWDN) could be a good market crash opportunity. I believe there will be increased demand for kitchens and other services. Howdens is well placed to meet such demand and is a business I have used personally and have liked for some time from an investment perspective.
Market crash opportunity
Howdens is recognised as the UK’s number one trade kitchen supplier. This accolade was bestowed upon HWDN based on a 2018 independent report by Mintel. The report confirmed that Howdens has the largest share of the kitchen market in the UK.
Aside from kitchens, it offers joinery, hardware, flooring, and appliances sales. HWDN operates through a depot system rather than conventional retail outlets. It currently has over 750 depots across the UK, with some in France and Belgium too.
The HWDN share price is down nearly 20% year-to-date. Its current share price sits at close to 550p. Prior to the market crash, shares were trading at 729p per share. I believe the current price is a good opportunity and it will be sooner rather than later before pre-market crash prices return.
Howdens released a half-year report yesterday that highlighted the impact of Covid-19. The update reported a loss of over £14m in the first half of this year. In the same period last year it made £78m in profit. Sales were down nearly 30% but this was to be expected. Net cash levels were up compared to the same period last year. HWDN shrewdly utilised government help during the lockdown and market crash.
Despite the negative aspects of the report, I am not overly concerned. Howdens reported that during the four weeks to 11 July, sales were already ahead of the same period last year. In addition to the financials, Howdens maintained its plan to open 20 new depots across the UK and France. Furthermore it wanted to refurbish 30 older depots despite the market crash. This gives me confidence in the belief Howdens has it in its offering and future prospects. Full-year results for 2019 released six months ago were positive with a nearly 10% increase in profit and increase in revenue also.
Built to last
In an uncertain economic climate such as the one we find ourselves in, sales will be affected. With that being said, I feel that as things begin to return to normal Howdens sales levels will increase.
I feel Howdens is a good investment opportunity, especially at current prices. It benefits from a strong history of performance including profit and growth. In the last 10 years, its share price has increased over 500%. I believe this stock is a great market crash opportunity. I would place this in my buy and hold category.