Hi @PeregrineCapital i am a holder and have grappled with the risk and the fact “DUSK” is labelled discretionary.

So my question is can that 11.2% dividend be maintained?

Sometimes I think the historical definition of a discretionary item has not kept up with todays norms. What someone born in the 50-60-70s consider as a want is most likely influenced by what they needed (could afford) to get by and function in the 80-90-00s.

Today the quality of life and what’s important as a result of a trend or life-work balance pushes so called wants into the necessity basket in order for this better life balance. So I suppose the word “discretionary” on a whole is dependant on whom / what generation you ask and what they feel is required to negotiate society in 2022 both from an lifestyle capacity.

For me I suppose the concern I have is what are normal operating levels?

Having a relatively short history as a listed company and benefitting from the stay at home covid bump I am waiting to see what normalised revenue and profit levels will be.

As such, I am less concerned with the impact on a reduction in discretionary spending as I think the DUSK products fall in that affordable luxury zone that allow for a semblance of normality even when times are tough.

In saying that I have a margin of error (25% reduction) that I have factored in and so am assuming a dividend of 15c (still 8.4% at its current price of 1.78). Should the dividend remain at 20c then I consider this a bonus.

Should this be it’s new normal baseline payout from where it then slowly builds then I think this is still a significant and well above market average dividend returns. Even if there is little to no CG, at 8.4% you are probably beating most people in the market over the next few years. That’s nothing to sneeze at.

Note: I hold.

Interesting update that possibly gives us an insight into “affordable luxuries”. With Xmas coming up I would think “affordable luxuries” may be front and centre. The companies ability to embrace opportunities such as their “Halloween homeware collection” shows clever management who can adapt and take advantage of opportunities. Assuming the NPAT falls between 21 and 22 results and payout ratio holds we are looking at a 20-25c (9-11%) full year dividend!

Note: I am a holder.

Considering the numbers of days lost due to store closure (24%) and the reduced foot traffic over the xmas period the market seems to be taking a sit back and watch attitude with DSK. The current valuation seems to not be valuing the purchase of the Eroma Group which the company reported will be EPS accretive in year 1. After 120% increase (over 2020) in online sales in 2021 a 4.3% increase this year appears underwhelming however online sales only contribute 9% of sales and DSK is the type of store you want to go in to smell the fragrances and browse through the latest offerings in a setting that allows you to get a feeling of how it fits in with your home. That’s not to say online sales can not grow.

Bull Case: EBIT is expected to be down ~24-25% (21m v 28m) basically equivalent to the loss in days related to covid store closures (24%). So assuming no more store closures from now and we factor in continued “new” store openings, the potential for overseas growth, low debt (10m), a cash balance of 33m, the addition of Eroma which, opens up additional product markets and the ability for synergy savings and reports the purchase will be EPS accretive in year 1 then the current valuation of ~8PE (~2.58) seems a reasonable entry point for those interested in a profitable retailer with a low share count (70m).

Must be contender for acquisition of the year @ ~20% EPS accretion from Year 1 before synergies. Company call today reaffirmed these targets!

I really feel DSK is a miss-understood consumer discretionary company. Its seems that many people see it as a candle company and do not understand the fact they have created a "BRAND"name. Its more than just candles (34% revenue), selling mood reeds (9%), diffusers and consumables (31% revenue), homeware products (11%) and others (15%). They have created a collection of fragrances which, are sold with cosmetic type high margin. In effect they are creating a Brand name much, like a cosmetics company. Although, only recently listed it has shown a steady increase in in-store revenue, online revenue and LFL sales since 2017.

The jewel is the DUSK reward membership which shows great repeat spend amongst this large cohort who get discounts and special access to special only fragrances.

This is being under-rated as the close down across the country probably will result in reduction in in-store sales in this current quarter. However, with a pipeline of new stores, a venture into NZ, continue growth of their on-line store and a growing base of new and repeat customers DUSK has significant run-way for growth. At a PE12 and with adividend yield of 4.7% the current price of 3.27 provides an attractive entry price if you are wiling to look past the possibility of reduction of sales in the next quarter. However, if the country is open for the crucial Xmas period then the pent up energy should lead to a bumper Xmas period.

I am taking a starter position and will double my $$$ contribution once the FY results and early update on the present quarter are presented. I will then decode if I pull the trigger or wait to observe the opening up of the closed states.

In summary I think if you look at DUSK as purely a candle store you are missing the "BRAND" they are creating and with their own custom made fragrances selling with cosmetic type margins they are producing products that help turn a house into a home. In a covid-world a once discretionary product has now become a need and DUSK is  the go-to Brand. by investing into developing DUSK brand fragrants for candles and difusers and including other homeware they are creating add ons and up-sells that increase the revenue per customer.

I hold DSK in my own portfolio and have put in an order in my Strawman Account.