Most of us have been spending a lot of time at home since March 2020. With outside activities limited, many have turned to home improvement. We are now in the midst of a DIY boom in the UK and abroad. There are two UK shares that I believe stand to benefit from this. One I see as a FTSE 100 value stock, the other as a FTSE 250 growth stock.
Kingfisher (LSE:KGF) is the parent company of brands like B&Q and Screwfix as well as DIY retailers in France, Poland, and Romania. These household name brands became the go-to stores for many renovating their homes. Indeed, Kingfisher’s half-year results showed a 22.2% increase in sales on the previous year. Kingfisher has been one of the more underwhelming UK shares. It is down close to 7% in the past five years. But the story is more positive in 2021, up 21% year-to-date (YTD) at the time of writing.
Despite the strong recent performance in the share price, the company still looks good value to me. It has a price-to-earnings (P/E) ratio of under 9 and yields 2.79%. Kingfisher CEO Thierry Garnier and CFO Bernard Bot have similar viewpoints and have snapped up close to £230k in shares.
The pre-pandemic stagnation of the share price is a concern. Could this be more of a value trap than a value stock? I’ll be looking for the company’s growth outlook in it’s third-quarter trading update on 24 November. As working from home continues to be the norm, I think the sector can continue to prosper.
Howden Joinery (LSE:HWDN) is another company thriving since the pandemic. It is a supplier of kitchens and joinery products and the sector has been flourishing. This increased demand provides Howden Joinery with pricing power. With supply chain disruptions and bubbling cost inflation, the company has passed additional costs on to its customers.
The share price is up close to 35% YTD. Unlike Kingfisher, it has had strong performance in the last five years too, up nearly 165%. In the trading update for performance in the year to 31 October, it announced 20.8% growth in revenue. Compared to the same period in 2019, total revenue was up 35.7%. The company was optimistic for the rest of the year too. Pre-tax profit forecasts increased from £298m to £360m. If this spectacular performance continues, Howden Joinery has a chance of promotion to the FTSE 100.
I would not consider this UK share to be cheap with a P/E ratio close to 22. I don’t think it’s expensive either but will demand continue at these levels? The company warned that it expects a return to “a more normalised trading pattern and performance in 2022“. The growth in the last two years is likely to slow.
Outlook for 2022 and beyond
The performance of both of these UK shares will be influenced by the rate of return to the office. Any tightening of Covid-related restrictions could give the companies a boost. A return to ‘normality’ could have the opposite effect. I believe that both UK shares have room to run and I would add both to my portfolio today.