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Here’s why the Dusk (ASX:DSK) share price has jumped 10%

The Dusk Group Ltd (ASX: DSK) share price has jumped 10% after providing an update.

Dusk is a retailer of home fragrance products, with a range of Dusk branded products which are sold in both stores and online. The range is designed in-house and exclusive to Dusk. It boasts of being the leading Australian omni-channel retailer of home fragrance products like candles, ultrasonic diffusers, reed diffusers, essential oils and fragrance-related homewares.

What was in the update?

Dusk gave a trading update and earnings guidance for the first half of FY21.

It said that “outstanding” sales and earnings growth has continued across the key trading months of November and December. The company also said that it finished the half with a well-balanced inventory position, no drawn bank debt and significant surplus cash.

Based on unaudited financial results to the end of November and a preliminary estimate for December based on actual sales, Dusk said that FY21 first half sales is expected to be $90 million to $90.5 million, compared to $58.7 million of sales in the prior corresponding period. The EBIT (EBIT explained) guidance range for the first half of FY21 is $26 million to $27 million, up from $9.7 million compared to the first half of FY20.

Dusk also said that it had approximately $33.5 million of net cash at the end of the FY21 first half.

Management comments

Dusk CEO Peter King said: “The results delivered across the first half of FY21 are well ahead of the results delivered in the prior corresponding period despite a significant period of disrupted trade in Melbourne.

They build on the strong results delivered across the past three years and further demonstrate the success of our focused strategy and the ability of our team to execute, including in a volatile environment where agility has been key.”

Summary thoughts

This was clearly a strong result and I can see why Dusk shares are up so much, particularly with an increase of the EBIT margin of more than 10 percentage points to around 29%.

I don’t know how much growth Dusk can generate over the coming years, so it’s hard for me to price Dusk for its longer term potential. For me, there are other retail ASX growth shares that could be better like BWX Ltd (ASX: BWX) and City Chic Collective Ltd (ASX: CCX).

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Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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