Howden Joinery: Depot Autonomy, Vertical Control Create Durable Moat

Todd Wenning of KNA Capital Management presented his investment thesis on Howden Joinery (UK: HWDN) at Wide-Moat Investing Summit 2025.

Thesis summary:

Howden Joinery is an idiosyncratic, best-in-class UK-based supplier of kitchens and joinery with a powerful and defensible economic moat built on a unique, trade-only business model. The company operates in the GBP 11 billion UK kitchen market, focusing exclusively on supporting small, independent builders and installers (“tradespeople”). The core of the investment thesis is that the market underappreciates the strength and resilience of Howdens’ interconnected competitive advantages, which have allowed it to consistently gain market share and generate attractive returns in a cyclical industry. The company’s culture, growth avenues, and shareholder-friendly management team are not fully reflected in its current valuation.

The company’s moat is multi-faceted, stemming from a business model designed to make its trade customers more successful. The cornerstone is a decentralized network of over 870 depots, which are run as independent businesses by empowered local managers. These managers are highly incentivized, earning a share of their depot’s profits, which fosters an entrepreneurial culture and results in extremely low manager turnover. This dense depot network creates powerful network effects and logistical advantages, ensuring product is always in stock and close to job sites. This reliability, combined with services like free kitchen design and short-term credit, creates high switching costs for tradespeople, whose livelihoods depend on the speed and efficiency Howdens provides. These advantages are reinforced by low-cost production, achieved through scale and vertical integration.

Beyond its entrenched UK position, Howdens has multiple levers for long-term growth. The company sees a clear path to expanding its UK depot footprint to approximately 1,000 locations while also updating its existing estate to improve efficiency and customer experience. Growth will also be driven by moving upmarket into higher-priced kitchen ranges and expanding into adjacent product categories, such as the recently launched fitted bedroom line, which leverages the company’s core competency in cabinetry and its existing distribution network. While the international expansion into France has been challenging, it is being reset with a more focused strategy, and the success in Ireland demonstrates the model’s portability. Further European expansion represents a significant long-term optionality that appears to be undervalued by the market.

Led by a thoughtful management team that perpetuates a “founder’s pedigree” and a stakeholder-focused culture, Howdens has demonstrated a commitment to being “worthwhile for all concerned.” This approach supports the anti-fragility of the business. At a recent price of GBP 8.74, the market appears to be overly focused on near-term cyclical headwinds in the UK housing market and the mixed results in France. The valuation fails to fully credit the quality of the core business, its flywheel-like characteristics, and the multiple paths to future value creation. The base case suggests a value of GBP 12 per share, indicating that significant upside exists as the market recognizes the durability and growth potential of this unique enterprise.

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About the instructor:

Todd Wenning is the President and CIO of KNA Capital Management, based in Cincinnati, Ohio. Before founding KNA Capital, Todd spent eight years on the buyside with Ensemble Capital and Johnson Investment Counsel. Prior to that, Todd was a sell-side analyst with Morningstar where he served as the head of the equity stewardship methodology. Earlier in his career, Todd worked for The Motley Fool, SunTrust Asset Management, and Vanguard. Todd is the author of the Flyover Stocks newsletter and is a lecturer at The University of Dayton. He holds a BA in History from Saint Joseph’s University in Philadelphia and the Chartered Financial Analyst designation.

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