Shares for the future: a FTSE 100 firm whose qualities will prevail

Howden Joinery Group (LSE:HWDN) grew in a contracting kitchen market in the year to December 2025. It might have grown more had it opened more depots, but at the end of the year its estate was only 2% bigger than it was at the end of 2024. It represented the slowest growth in depot numbers for at least a decade.

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The economy is challenged on many fronts, and Howdens is experiencing teething problems in France. Nevertheless, revenue and profit grew in the mid-single digits, an improvement on the previous year but slightly below the long-term average.

The company anticipates a flat market in 2026, and modest growth as it gains more market share.

Making things easy for builders                                

Howdens makes things easy for builders. By selling only to the trade, it keeps prices confidential so builders can set their own margin. They get up to eight weeks credit so they can finish a job and collect payment before paying Howdens.

Howdens designs kitchens so they are easy to fit and keeps everything in stock, so builders are not delayed while they wait for parts to come in. They pick the parts up from convenient out-of-town locations.

It employs kitchen designers to help builders and their clients plan their kitchens.

This all costs money, but Howdens reaps the rewards.

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Trade customers are repeat purchasers. Saving them time and money keeps them coming back. Out-of-town locations are cheaper to rent than high street showrooms aimed at attracting retail customers. The builders sell the kitchens and deliver them to their customers, reducing Howdens marketing and distribution costs.

This business model was unique to the UK when Howdens introduced it over 30 years ago, and it has proved to be effective. Howdens has become the largest supplier of kitchens in the UK.

Scale confers additional advantages. For example, high volumes make it economical for Howdens to manufacture its own cabinets. A nationwide distribution network facilitates near 100% stock availability. And Howdens can buy in bulk from suppliers.        

Market saturation    

Almost inevitably Howdens is facing a challenge born of its own success. Sooner or later it will have saturated the UK with depots. It operated 891 at the end of the year and says it has “line of sight” to about 1,000. Even at 2025’s reduced rate, that is between four and five years of expansion.                              

Such targets can be lifted, but there are other reasons to believe saturation looms. Howdens reports 88% of the UK population lives within five miles of a depot. In 2019, it opened its first small footprint depots for areas with sparser, often rural populations, that could not support a full-sized depot.

Excluding fitted bedrooms, which Howdens added to the product line two years ago, Howdens estimates its share of the £11 billion UK kitchen and joinery market is roughly 20%.

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The fitted kitchen market alone is worth £6 billion, and Howdens says its share is greater than its share of joinery.

Fitted kitchens are big purchases but profitability has only been moderately sensitive to economic downturns, while Howdens has rolled out its impressive business model.

Mostly small builders repair and improve homes, so demand does not seize up when the property market does.          

However, Howdens’ profit margins have fallen somewhat, from 13% to 11% during the last few inflationary years because it has absorbed losses overseas and higher costs.

Its risk report notes “geoeconomic confrontation and interstate conflict emerging as major global risks for the year ahead.

Range and territorial expansion     

Beyond opening more depots, Howdens is eking more profit from existing depots through efficiencies like making better use of space and improving its digital infrastructure.

It also has a long-established brand of home appliances (Lamona) and is building own-branded ranges in flooring, bedrooms, ironmongery and other categories.

Probably the greatest growth opportunity lies overseas.

Between 2015 and 2018, Howdens operated a pilot store in the Netherlands and another in Germany. But in 2018 it chose to focus on France and Belgium, where it had been experimenting for many years. Latterly, it has targeted the Republic of Ireland too.

Howdens says France and Ireland have no big trade-only fitted kitchen suppliers, so it can establish itself there as it has here. France is much more significant, though, because of its size.

In both territories it is concentrating on particular cities such as Paris, Dublin and Cork, where there are high populations it can supply from common warehouses, and build word of mouth among tradesmen.                      

But France is experiencing growing pains, having added 20 stores and increased its estate by 50% in 2022. Since 2023, it has added no new depots there, focusing instead on making the ones it has opened profitable.  

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In 2025, Howdens closed two French depots and impaired the value of six in total, which it plans to relocate in the next two years. It is also experimenting with smaller depots in France.

It may be making headway. International sales increased 13.5% compared to 3.8% in the UK, despite the fact its international estate only grew by 1% as three new Irish depots offset the two lost French ones.

Howdens says revenue growth in France has improved markedly as it has refined the format, trained up staff, and hosted promotional activities like trade days.

In Ireland, things are going well. The company plans five new depots in 2026, two more than in 2025.                                       

Scoring Howdens

It is hard to score companies against the backdrop of war in the Middle East and dire prognostications about the economy. To keep things in perspective, in other words. Here goes:

My score is lower than it was due to the growing maturity of the business and uncertainty about France and the economy. Nevertheless, I still believe Howdens’ qualities will prevail over the long term.

30 Shares for the future

Here is the ranked list of Decision Engine shares. I review the scores at least once a year, soon after each company has published its annual report. The price scores are calculated using the share price prior to publication.

Generally, I consider shares that score more than 5 out of 10 to be worthy of long-term investment in sizes determined by the ideal holding size (ihs%).

Bunzl (LSE:BNZL) has published its annual report and is due to be re-scored. I am also reconsidering the scores of Softcat (LSE:SCT) and Autotrader Group (LSE:AUTO).

Click on a share's score to see a breakdown (scores may have changed due to movements in share price). Key: qual is the share’s score out of 9 for the three quality factors (capabilities, risks, and strategy), price is the price score from -3 to +1, and ih% is the suggested ideal holding size as a percentage of the total value of a diversified portfolio.

Richard Beddard is a freelance contributor and not a direct employee of interactive investor.  

Richard owns many shares in the Decision Engine. He weights his portfolio so it owns bigger holdings in the higher-scoring shares.

For more on the Decision Engine and Share Sleuth, please see Richard’s explainer.

Contact Richard Beddard by email: richard@beddard.net or on Twitter: @RichardBeddard