Pinned straw:
Well I guess that answers the question about whether scented candles are a discretionary purchase. Dusk's trading update today may even be worse than some were thinking. The second half of the financial year is always a much quieter period for them but with consumers keeping wallets shut, it's actually going to be a loss making half this year.
Having said that, underneath is a business that does make good money under normal circumstances and is maintaining its gross margin at close to 70%. If the economy were to go to hell in a handbasket you might pick this up for a steal in the next 12 months. The big BUT though is a pending CEO transition and it might be worth waiting to see what the new dude is bringing to the table.
[on watchlist only]
Ouch! BST earlier this week and now DSK. This supports what I have been hearing in personal discussions with different retail operators. Whilst, cafes in shopping centres remain busy with the 40-50-60-70 year olds lucky to own their own homes debt free it’s masking a collapse in general retail. Let’s see who is next? I wonder what, if any influence this has on the RBA? Then again not sure too many of the RBA heavyweights are visiting BST and DSK.
Yeah @Noddy, it has been looking very quiet in the Dusk stores lately. I’ve done some quick and dirty calculations for FY23. Pick me up if it looks whacky!
FY23 EBIT $16 million. After tax $11.2 million NPAT (ignoring depreciation and abnormals, 16 x 0.7) That’s 18cps (11.2 / 62 million shares) per share compared to 31cps last year, down 42%.
ROE will come back to 30% (EPS/BV = 18/59) compared to historical 75% (2021) and 53% (2022). The big question is will ROE continue to decline from here, or is this as bad as it gets?
If you believe this is as bad as it gets and Dusk can maintain ROE at 30% from here, then your future returns could be as high as 19% per year at the current trading price $1.34 (McNiven’s StockVal formula). At $1.34 Dusk is trading at about 7 times estimated FY23 earnings.
As I said, this is a quick and dirty calculation and much depends on whether dusk fragrances will remain ‘on the nose’ over the next few years.