Candle in the wind: Why is the Dusk share price down 20% in a month?

Let’s have a look at what happened in May for the candles and home fragrances company.

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A smouldering white candle with a burgundy background indicating the falling Dusk share price today

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Key points

  • Dusk shares are down 0.26% today to $1.94  
  • It's been an uneventful year for the candles and home fragrances retailer 
  • The Dusk share price lost more than 20% in May 

The Dusk Group Ltd (ASX: DSK) share price continues its slide below $2 and is currently trading at $1.94, down 0.26% for the day so far.

The Dusk share price has been in the doldrums this year. For a three-month period between February and the end of April, it was rangebound between about $2.45 and $2.80. Then over May, the shares lost 21.96%. Boom, just like that. Like a candle in the wind.

Dusk’s flame-out in 2022

This year has been pretty unexciting in terms of ASX announcements from Dusk.

In February, the company released its FY22 half-year results which showed a 12% decline in sales revenue largely due to lockdowns and mandated store closures on the East Coast.

Lockdowns proved a major problem for Dusk, leading to a collective 5,483 lost trading days 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 accounted for 9.7% of total sales.

Dusk announced it would pay investors an interim dividend of 10 cents per share fully franked. Based on the share price at the time, it represented an attractive dividend yield of 3.85%.

Then in March, Dusk disappointed investors by terminating its proposed acquisition of Eroma. There was no explanation other than the deal not meeting “certain conditions”.

The $28 million purchase of Australia’s leading supplier of candle making inputs and fragrance oils was announced in December 2021.

These are the only two price-sensitive announcements we have seen from Dusk in 2022 so far.

Dusk share price history

Dusk is a young ASX share. It began trading in November 2020. Its initial public offering (IPO) price was $2 and it closed on day one at $1.69.

Dusk had a quick ascension on the ASX, with a series of positive results pushing the share price to an all-time high of $4.07 in July 2021. It began drifting down in August and the decline has continued in 2022.

Since the beginning of the year, the Dusk share price has lost almost 40% in value.

Last month my Fool colleague Tristan posed the question: Is Dusk now “too cheap to ignore“?

Is Dusk worth buying for the dividends?

Dusk is a very good dividend payer. On 19 April, we reported that Commsec was tipping a grossed-up dividend yield of 10.25% in FY22 and further growth in dividends in FY23 and FY24.

The article said Commsec numbers “suggest the Dusk share price is valued at less than 10x FY22’s estimated earnings”.

Motley Fool contributor Bronwyn Allen has positions in Dusk Group Limited. 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 Scott Phillips.

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