UK shares in DIY on the up
Howden currently has more than 700 depots across the UK and Europe and is recognised as the UK’s number one trade kitchen supplier. It currently has the largest market share of the kitchen market in the UK. As well as kitchens, it sells joinery, hardware, and appliances too.
Howden has a unique business model in that it does not have conventional retail outlets like other UK competitors. It has depots and these depots service its trade customers with over 470,000 registered tradespeople having accounts with Howden. It does sell to the public but these are at different rates than to its trade accounts.
As I write, shares in Howden are trading for 934p per share. A year ago, shares were trading for 669p which is a return of 39% in 12 months. Shares prior to the pandemic market crash reached 7,32p, which means these levels have been surpassed by some distance.
For and against
FOR: Howden’s current market share and its vast reach are definitely positive in my opinion. With over 700 depots across the UK and Europe, it has the ability to reach tradespeople and consumers alike and boost its performance. Furthermore, with the largest kitchen market share in the UK alone, this can only boost performance and any potential returns for investors too.
AGAINST: Since the pandemic, the rise of DIY projects exploded as consumers decided to spend money on such projects. This money would have usually been spent on holidays or leisure activities. Will the increased demand in DIY products continue now that leisure venues are open? Secondly, there is lots of competition out there. I have looked at other UK shares that are vying for the market share in this sector too.
FOR: Howden has a good track record of performance and growth. Howden started off with just 14 depots in 1995. Twenty-six years later it has over 700 depots. I understand that historic performance is not a guarantee of the future but I still review it as a gauge. I can see that for three years prior to the pandemic (2020), revenue and gross profit increased year on year. 2020 levels weren’t far off the previous three years. The current DIY boom could boost performance to pre-pandemic levels.
AGAINST: There are credible issues that Howden and other UK shares in the DIY sector face, however. One of the biggest is the supply chain crisis linked to the shortage of HGV drivers affecting deliveries. In addition to this, inflation is a worry too. The rising cost of materials and products could eat into the profit margins of Howden. This could affect returns and investor sentiment.
Overall I would happily add Howdens shares to my portfolio right now. I believe the positives outweigh the negatives. Howden has a good track record and has grown into an impressive business. I believe the issues it does face are temporary such as the supply chain crisis. I believe Howden is one of a number of UK shares from the DIY sector that could boost my portfolio.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Howden Joinery Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.