A variety of global and local lockdown measures have led many investors to draw attention to the share of retailers in home improvement. Today we are introducing two FTSE companies – Kingfisher (LON :), (OTC 🙂 and Howden Joinery Group (LON :), (OTC 🙂 – both based in the UK, which can appeal to a wide range of investors.
Kingfisher
member Kingfisher is an international home improvement chain with more than 1,350 stores. It operates in several European countries under local banners, including B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçta?.
The retailer released trade updates on November 19. Quarterly sales were £ 3.5 billion (or $ 4.67 billion), up 17.6% year-on-year (yoy). Management noted that there are:
"Strong performance in all retail banners and categories. In addition" Group e-commerce sales in the third quarter [were] increased 153%. "
Those who have visited a B&Q store in the UK may have noticed the similarity in store layout and product offering between the Kingfisher brand and the Home Depot (NYSE 🙂 in Atlanta, Georgia. Their stock prices also showed a similar positive trend in 2020. KGF and HD shares are so far up about 28% and 25% respectively in 2020.
On November 24, KGF stock closed at 277.5p ($ 7.4 for US stocks). On the downside, HD is a bit shy at $ 275. Both companies have taken advantage of the tailwinds supporting DIY and online shopping trends.
B & Q's e-commerce site even operates at www.diy.com and currently offers several Black Friday deals.
Black Friday and Cyber ??Monday are, of course, the designations given to the post-Thanksgiving buying period on Thursday in the United States. The terms and custom have been exported to many other countries, including the United Kingdom.
A recent PWC report entitled "Black Friday and Cyber ??Monday – 2020" highlights that "Black Friday has been a major event on the UK retail calendar for several years". In 2019, spending over that period totaled about £ 7.8 billion (or $ 10.4 billion).
Forward P / E and P / S ratios for Kingfisher are 12.08 and 0.52, respectively. In comparison, the forward P / E and P / S for Home Depot are 22.12 and 2.33.
We believe there is still room for Kingfisher stocks to provide long-term growth. Short-term potential profit-taking of around 5-7% could put pressure on the stock and provide potential investors with a better entry point.
Howden Joinery Group
Our second company under consideration is the member of Howden Joinery Group. The London-based company is the country's largest supplier of kitchen supplies. The extensive network of approximately 700 depots sells kitchens, kitchen appliances and joinery products directly to local companies and dealers.
A large number of Howden's customers are located a short distance from one of the points of sale. It also has depots in France and Belgium.
However, unlike Kingfisher stock, HWDN shares have not had a good 2020. The stock is down about 5% year-to-date. It closed on November 24 at 628.6 p. ($ 35.6 for US stocks).
One-year chart of Howden Joinery Group.
On November 2, the group released a trade update for the period from June 14 to October 31. Since the release of the, which covered the period up to June 13, management noted that "trading has improved significantly". Investors were encouraged by "signs of pent-up demand since the lockdown and high availability of stocks".
In addition, "The Board will consider paying another dividend with the announcement of Howden's full-year 2020 results in February 2021." Dividends were suspended earlier in March.
According to Marco Amasanti of Mintel, a leading market information agency:
"COVID-19 will see kitchen furniture sales fall sharply due to a reduced need for large purchases in 2020, store closings, a reluctance to allow traders into the home and a slowdown in the housing market. of kitchen usage in the UK, refocusing consumers on the importance of this space and creating new opportunities for the market. "
The forward price earnings ratio and the price earnings ratio of Howden shares are 23.75 and 2.88, respectively. Given the current UK lockdowns, we think it may be too early to invest in HWDN shares.
However, a potential decline of about 10% would improve the risk / return potential for long-term investors. We agree with Amasanti that the coming quarters may bring more revenue to the group.
