We might not have time to stop and smell a rose, but a candle? Now we’re talking. However, that might not be the case anymore as households face the pressures of rising prices. People would rather plug their noses than invest in fragrances, as home fragrance company dusk’s (ASX: DSK) results for the first half of FY23 reveal.
With the eCommerce buzz fading, dusk’s online sales fell 37.8% to $4.8 million after rising about 40% in the first half of FY20. Its eCommerce arm represents 5.6% of its sales. Its earnings fell by over 10% to $19.1 million, and profit declined by 9.5% to $14.7 million.
Average customer spending on its products also fell by 5.7% to $54, as fewer buyers showed interest in its pricey items and online shopping. People have become more cost-conscious, and candles are not on their priority list.
That said, not all was gloom and doom for the Company.
CEO and Managing Director, Peter King, said, “dusk delivered a solid result in the first half given a challenging trading environment. Total sales were 7.6% higher vs pcp and our gross margin of 67.0% was slightly lower due to increased promotional intensity and a weaker Australian dollar vs the US dollar.”
When customers were inside its brick-and-mortar stores, dusk’s teams managed to lighten shoppers’ wallets. Sales conversions inside were 70% compared to 57% in H1 FY22.
Plus, overall sales of $86.1 million were up 7.6% and 47% higher compared to the pre-pandemic period of 1H FY20. This was despite a 29% decline in foot traffic outside its stores in the seven critical trading weeks leading to Christmas.
King added, “Channel mix normalisation continued with the increase in bricks and mortar sales more than offsetting the online decline. The performance of our three trial stores and website in New Zealand was in line with expectations and has provided valuable insights and learnings regarding operations and consumer preferences.”
For instance, a close look at customer behaviour reveals that it’s not that people are not interested in candles anymore. It’s just that they don’t want to spend a fortune on them. That’s probably why people signed up for dusk’s loyalty program, where active membership increased from 718k in H1 FY22 to 722k in H1 FY23.
That’s great for dusk, seeing as, typically, members pay more than non-members. In H1 FY23, members accounted for 59% of total sales, down from 62% in H1 FY22. Opening additional stores in new catchment areas are expected to drive further growth in member numbers.
King shared, “Total sales for the first seven weeks of 2H FY23 are 3.0% lower vs PCP. [The] new product landed in February and has resonated with our customers with early sell through robust.”
The Company will open six new stores in Australia in the second half of FY23, five open before Mother’s Day, i.e. May 14.
As per its announcement, dusk asserts that it offers customers “an affordable gift or personal luxury”. However, its supposed affordability—with candles priced around $30—has come into question. The Company cannot provide FY23 guidance as there’s no telling what the macroeconomic environment will look like.
Dusk is also set to undergo a leadership change. Last month, King announced his resignation from dusk after nine years in the role. The Company is currently casting around for a new CEO.
Alinda is a Business Reporter for The Sentiment
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1 Comment
CharlesM_Syd
Great articles. Below are a few other things I found interesting from Peter King’s update:
Reply– The drop in average sales was primarily driven by lower online sales (i.e. online purchases are generally larger)
– NZ store roll-out had pretty subdued sales given the floods/rate rises
– Whilst they are cycling off lower sales in Jan/Feb; historically those are pretty unimportant months
– RMB/AUD does not help their cost of sales
– The stores they are rolling out are generally in semi-regional areas (e.g. Orange, Warrnambool) where they have had better sales than expected
– Store refurbs are now c.70% (prev 50%) so they’re hoping that those help H2 sales