- Full-year guidance increased after strong trading
- Record performance in peak October trading period
- Resilient business model and well-established strategy
The UK’s largest trade kitchen supplier Howdens (HWDN) said continued ‘strong’ trading means it now expects full year pre-tax profit to be slightly ahead of market expectations, sending the shares up 3.3% to 536p.
The average analyst forecast for 2022 pre-tax profit is £387 million with a range of £373 million to £410 million, according to the company.
So far this year analysts have increased their earnings estimates by around 15% which is at odds with the roughly 42% drop in the share price.
Today’s trading update confounds fears of a sharp slowdown in consumer spending as the cost-of-living crisis bites into household budgets.
Year-on-year revenues increased 6.6% for the period between 11 June and 29 October which included the four-week peak selling period.
Group like-for-like sales growth was 4.7% with the UK up 4.5% and International up 15.7%.
Chief executive Andrew Livingston commented: ‘Howdens achieved a record performance in our important peak trading period. We continued to gain market share supporting our customers with a strong product line-up, high stock availability and outstanding service.
‘Our kitchen and joinery markets are large and attractive, and we are prioritising investment for future growth through our successful strategic initiatives.’
While cognisant of the uncertain economic backdrop and the potential for continued inflationary pressures and supply chain issues, the company said it remained confident in its ‘resilient’ business model and ‘well established’ strategy.
EXPERT VIEWS
Shore Capital’s Graeme Kyle said he was encouraged by Livingston’s comments regarding Howdens gaining market share in the period and retained his pre-tax profit forecast for revenues of £391 million.
Kyle maintained his buy recommendation and noted the trailing price-to-book ratio of 3.2 times was ‘well below the previous low of 4.5 times observed in January 2009 during the global financial crisis.’
AJ Bell investment director Russ Mould commented: ‘Cost-of-living crisis putting people off spending? There’s no sign of that happening with Howden Joinery.
‘If you’re planning to stay in one place for a while it makes sense to invest in a good kitchen, which is one of the central parts of the home for a lot of families.
‘Howden is a smart operator with a history of being able to adapt with the times, and a good record of making strong returns from the money it invests in its business.’
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The editor of the article (Ian Conway) owns shares in AJ Bell.
