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While investors worry about artificial intelligence, FTSE 100 keeps grinding higher. And one unglamorous constituent shows this better than most.
Howden Joinery Group (LSE:HWDN) isn’t going to inspire a Reddit thread. But lower prices, wider margins, and repeat business make a formula for long-term growth while everyone else watches semiconductor charts.
Why the model works
Howdens sells almost exclusively to small builders – not homeowners – and that distinction does the heavy lifting for the firm. It means no showroom rent and no design consultants pacing beige carpet.
Instead, what you get is a warehouse, a trade counter, and builders who already know what they want. That keeps the cost base thin, letting Howdens undercut rivals while making better profits.
Gross margin held at 62.8% in the first half of 2026. That’s a number that few retailers can get anywhere near, but the group also benefits from advantages of scale.
Howden operates 893 UK depots plus 82 more across France, Belgium, and Ireland. With aspirations for 1,000 over time, there should still be room for growth ahead.
Competition
Howden’s success hasn’t gone unnoticed by the competition. B&Q-owner Kingfisher has clocked the opportunity and is leaning harder into its own trade-focused Screwfix division.
That includes a new ultra-compact ‘Screwfix City’ format aimed squarely at trade footfall. There are nine of these so far and the firm has ambitions for more than 100 in total.
That’s something to watch, but it’s not worth panicking about – at least, not yet. Howden reported 3.3% revenue growth and 5.5% higher profits in its results last month.
Those figures are solid enough without being spectacular. So while Kingfisher is clearly doing well, the impact on Howden seems to be limited, at least for the time being.
The outlook
Howden’s store growth isn’t going to set the world on fire. But it should benefit from rising demand for kitchens across the UK – from new houses as well as existing ones.
The UK government is aiming to build 300,000 new homes in the next 10 years. And part of that involves regenerating existing estates, all of which will need kitchens.
Rising construction costs and planning delays could get in the way of this. Building homes has also proved more challenging than recent governments have realised.
Howden’s cost advantages, however, put the company in a strong position to service whatever demand there is. And a growing market can only be a good thing.
Worth buying?
AI and defence have been the big investment themes of the last couple of years. And I don’t think Howden is going to be pushing Nvidia or Rolls-Royce out of the headlines any time soon.
Nonetheless, lower prices and wider margins are a formula that’s worked for a very long time. And I think UK housing could be another example of growing industry.
At a price-to-earnings (P/E) ratio of around 15, the stock isn’t expensive – even by FTSE 100 standards. I think it’s well worth a look for anyone looking to diversify beyond the same old names.
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Stephen Wright does not own shares in any of the companies mentioned.
This story originally appeared on Motley Fool
