Here’s why the Dusk (ASX:DSK) share price is flaming out today

Dusk has surprised ASX investors with a disappointing announcement today.

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A white candle with a smoking wick symbolising the fall in the Dusk share price today

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Key points

  • Dusk shares backtrack 2.26% to $2.60
  • Dusk has cancelled its conditional purchase of Eroma Group
  • Last month, Dusk reported a drop in earnings following tough retail trading conditions

The Dusk Group Ltd (ASX: DSK) share price is treading lower during early Thursday afternoon trading. This comes after the company provided an update in regards to its acquisition agreement with Eroma Group.

At the time of writing, the specialty retailer’s shares are down 2.26% to $2.60 apiece.

Dusk share price falls as company walks away from Eroma deal

ASX investors are dragging the Dusk share price lower today following the company’s latest market release.

In its announcement, Dusk advised that it will not be proceeding with the conditional agreement to purchase 100% of Eroma.

In December 2021, Dusk announced it would take over Australia’s leading supplier of candle making materials for $28 million.

Dusk stated that the total acquisition consideration would be funded through three separate sources. This included $10 million from a new debt facility, a $13 million placement, and $7 million from existing cash reserves.

However, today the company said the deal did not meet “certain conditions”. As a result, Dusk has terminated the agreement.

In a statement, Dusk management said:

The acquisition agreement was, consistent with market practice, subject to certain conditions precedent to Completion. Satisfaction of all of the conditions has not been achieved. As such, dusk will not be proceeding with the acquisition of Eroma.

The statement did not reveal any specific details as to the conditions not met.

What else is happening with Dusk?

Late last month, Dusk delivered its FY22 half-year results, which lead to its share price slipping 4.25% on the day.

Dusk reported a 12% decline in total sales to $80 million. It attributed the poor performance to government-mandated store closures. The number of store trading days was reduced by about 24% (5,483 trading days lost) in NSW, Victoria, and the ACT.

On a positive note, online sales increased by 2.8% over the prior corresponding period to $7.7 million. This growing segment accounted for 9.7% of total sales.

Dusk declared a 10 cents per share fully franked interim dividend, which based on today’s share price represents a yield of 3.85%. The shares will go ex-dividend on 11 March.

Dusk share price snapshot

It has been a disappointing 12 months for Dusk investors, with the share price falling by 13% for the period. When looking at year to date, the Dusk share price has fared worse and is down about 19%.

This is a sharp contrast from September 2021 when Dusk shares touched an all-time high of $4.07. Since then, the shares have been gradually sloping on a downhill channel.

Based on today’s share price, Dusk commands a market capitalisation of $165.63 million. There are approximately 62 million shares outstanding.

Motley Fool contributor Aaron Teboneras 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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