Howdens outperforming the Kbb sector with 5.4% growth

Howdens Joinery

Howdens Joinery UK revenue grew by 5.4% in the first half of the year, resulting in news of Howdens outperforming the Kbb sector despite economic uncertainties surrounding Brexit.

Even with the growth, the company has said that it remains cautious and prepared for Brexit and in doing so had stockpiled £12 million of additional inventory in preparation for a “no-deal Brexit”.

In the latest financial update Howdens Joinery announced that its profit before tax of £78.1m (2018: £68.8m), was consistent with good sales growth with improved gross margins.

The results, whilst positive were partly offset by continued investment in the business and as a sign of its financial stability Howdens also revealed its plans to open a total of 40 new depots in 2019.

The ambitious plans for further expansion, again outperforming the sector will include five new facilities in Northern Ireland and five more in France. Fifteen of the planned new depots were already launched in the first half of 2019 and include the five new Irish depots as well as one of the five French depots.

In a press release, Howdens CEO, Andrew Livingston, said: “Howdens delivered another positive performance in the first half of 2019, with sales increasing by 5.4%, against tough volume comparators in the prior year. Just as importantly, gross margin improved as we achieved a more disciplined balance between price and volume in our depots. Profit before tax was up strongly, at £78.1m and we ended the half-year with £217m in cash, having invested £24m in the business and having returned £46m to shareholders.

“We have made good progress with our new initiatives, focussing on depot openings and our new format, range management and the development of our digital platform. We opened 15 new depots in the period, all in the new format, including five in Northern Ireland and one in France, and are reformatting a further eight of our older UK depots.

“We are encouraged by the start we have made to the year and, despite the economic uncertainties ahead, remain confident in our business model. With our peak trading period still ahead of us, we are on track with our plans for the year as a whole.”

Analysis

Given that the Kbb sector has seen a lot of continued uncertainty, job losses, store closures and the demise of the likes of BetterBathrooms plus many independents, news of Howdens outperforming Kbb sector may seem out of context.

How are Howdens doing it, one might ask? In a recent survey Howdens came out on top with a fifth of consumers buying their kitchen through the company. So, it seems the homeowners are using them.

Add to homeowners buying Howdens kitchens via their contractors the fact that property development has been buoyant and its not difficult to see that Howdens outperforming the Kbb sector is largely down to the fact that it services both sides of the market, the residential and the commercial.

The contract kitchens market is largely dominated by Howdens, Magnet and Wren and whilst smaller developers and large property groups alike use Howdens, Magnet and Wren, they have been more able to weather the losses in residential activities with its trade sales.

So that Howdens outperforming the Kbb sector has hit the Kbb headlines is not really much of a surprise given its strong foundations and whilst some of the High Street has avoided decline, there is still continued pressure and changing consumer attitudes, as big sheds and chains lose favour with consumers preferring independents, so time will tell if Howdens can sustain this financial growth.