The Dusk Group Ltd (ASX: DSK) share price is on watch today after the ASX retailer released its half-yearly results for the 26 weeks to 27 December 2020.
Despite 20 of its Melbourne stores being closed during the period, the group reported record revenue and profit growth.
The Dusk share price opened higher at $3.11, but has since retraced slightly to $2.90 at the time of writing.
Dusk’s HY21 highlights
Dusk achieved record performance in the first half of FY21, reporting sales of $90.9 million, up 55% on the prior corresponding period (pcp). Its omni-channel strategy continues to perform strongly, with online sales up 120%, which represents just 8.3% of total sales.
Moving down the income statement, the company reported a strong gross profit of $61.6 million, an increase of 62.5% on the pcp, resulting in an impressive gross profit margin of 67% across the period.
The company’s cost of doing business (CODB) decreased as a proportion of revenue to 34.7%, down from 45.7% compared to the prior period.
EBITDA increased by 194.1% to $28.3 million, and net profit after tax (NPAT) finished the half-year up 193.2% to $19.8 million.
A fully franked interim dividend of 15 cents per share was declared which will be paid on 26 March 2021. This interim dividend alone puts Dusk shares on a dividend yield of around 5.2%.
Growth drivers
Candles and diffusers prove to be Dusk’s biggest segments by sales volume, with growth up 54% and 68%, respectively, across the period. Its loyalty program, Dusk Rewards, is said to be the engine room of the company, helping grow transaction numbers and increase average transaction value (ATV) over the past six months.
Dusk Rewards members now account for 59% of total sales, which is up from 55% on pcp, while ATV increased by 17% compared to FY20 to $54.
The company’s increase in gross margin has partly been driven by stricter control pricing and COGS management due to its vertically integrated model.
Additionally, the company has reduced promotional discounting activities, and customers have shown an increased interest in higher-margin product categories such as electronic diffusers.
A largely fixed cost base helped Dusk unlock some operating leverage and decrease its CODB, even after accounting for the $2.8 million JobKeeper benefit which will reportedly be repaid to the government.
The company finished the half-year with a net cash balance of $34.9 million.
Future outlook
Due to the uncertain nature of retailing given the circumstances, management will not be providing full-year guidance. However, the company acknowledged that the second half of the year is typically much less profitable than the first.
According to management, currency tailwinds should be more significant as the year progresses. The company has also secured four new stores for the second half of FY21 (two in QLD, one in NSW, and one in TAS) after opening six new stores during the first half.
The current strategy remains in place, and the business believes it’s well-positioned inventory-wise to meet anticipated demand.
To learn more about Dusk, check out my in-depth article: Why I think Dusk could be one ASX share to look out for in 2021.
