Dusk (ASX:DSK) share price in focus after tripling profit in FY21

It was a very strong year for the specialty retailer…

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The Dusk Group Ltd (ASX: DSK) share price will be one to watch today.

This follows the release of the specialty retailer's full year results this morning.

Dusk share price on watch after tripling profit in FY 2021

  • Total sales up 47.4% to $148.6 million
  • Like for like sales growth of 32.7%
  • Gross profit up 54.4% to $101.3 million
  • Pro forma net profit after tax increased 225.5% to $26.8 million
  • Final fully franked dividend of 10 cents per share

What happened in FY 2021 for Dusk?

For the 12 months ended 30 June, Dusk delivered a 47.4% increase in sales to $148.6 million. This was driven by 10 new store openings and like for like (LFL) sales growth of 32.7%. The latter comprises 32.9% LFL store growth and 27% LFL online growth. Online sales now account for 7.5% of total sales.

Underpinning this growth was a 49% lift in Dusk Rewards customers to a record 413,000 and a 12% increase in Average Transaction Value (ATV) to $51. Management advised that the latter reflects the continued shift to higher price points in Home Fragrance product and the refinement of its range to offer larger pack size products across the core candle category.

Another positive that could support the Dusk share price is that its Dusk Rewards members continue to spend more, and shop more often than non-members. This bodes well for the future given its rising membership numbers.

Inventory levels are becoming very important in the current environment for retailers. Dusk appears to have hit a sweet spot with inventory broadly in line with plan. And while this is 67% higher than a year ago, it notes that the company was $2.6 million below plan at the end of FY 2020 due to COVID-19 impacts. Furthermore, the increase is concentrated in high turn core SKUs in Candle and Home Fragrance.

What did management say?

Dusk's Managing Director and CEO, Peter King, said: "Dusk's strong FY21 results were generated by agile decision making and focused execution over the period. A 225% increase of both NPAT and EBIT vs FY20 despite lockdowns across multiple States points to the resilient teamwork of the dusk organisation and continued execution of its business plan in a challenging trading environment."

"While COVID-19 has seen a shift in consumption to home related products, it should be noted that Q3 FY21 was the 17th consecutive quarter of LFL Sales and GM$ growth for dusk. December 2020 itself was the 4th consecutive Christmas of record sales and earnings."

"Record signups for dusk rewards in FY21 are a clear signal of future purchase intent into FY22 and beyond. To ensure these customers stay with dusk we will continue the laser like focus on our customers by developing and delivering differentiated dusk branded products that offer great value for money and affordable everyday luxury," he added.

What's next for Dusk?

One thing that could put pressure on the Dusk share price today was its poor start to FY 2022.

Unfortunately, due to COVID-19 related restrictions and store closures, the company has lost ~35% of potential trading days.

In light of this, for the first seven weeks of FY 2022, top line sales are down 28% or $4.4 million in dollar terms.

However, it highlights that in stores that are open or have re-opened, the company continues to see strong customer conversion rates and elevated average transaction value.

Dusk share price outperformance

Despite pulling back from recent highs, the Dusk share price is still outperforming the market by a significant margin in 2021.

Since the start of the year, the Dusk share price is up an impressive 50%. This compares to a 12% gain by the ASX 200 index.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dusk Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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