Nearly everything has become super expensive, so it is not surprising that little luxuries, like candles, are losing their appeal compared to everyday necessities. And it’s reflecting in the turbulent financial performance of premium retailers like the Aussie home fragrance retailer dusk Group (ASX: DSK). 

The Company has released its financial guidance for FY23, anticipating a decline in sales compared to the previous year. It expects sales to be in the range of $135 million to $137 million, down from $138.4 million in FY22.

What’s more, even the typically joyous Mother’s Day did little to ignite its profits.

dusk revealed that 45 weeks have been completed, including the crucial Mother’s Day period. Against this backdrop, the Company decided to disclose its sales and earnings before interest and taxes (EBIT) forecasts for FY23.

Sales are projected to be in the range of $135 million to $137 million, lower than the $138.4 million achieved in FY22. The Company also expects the Pro Forma EBIT for FY23 to range between $16 million and $17 million, down from $26.5 million in FY22. However, the gross margin rate for FY23 is anticipated to remain unchanged from the previous year.

CEO and Managing Director, Peter King, said, “Trading conditions in the second half of FY23 have been impacted by an increasingly cautious consumer environment, driven by higher interest rates and mounting cost of living pressures impacting the disposable income levels of our core customer.” 

King added, “Our key Mother’s Day period was softer than anticipated, which compounds the trend of subdued and volatile sales observed over the course of this calendar year so far. Although foot traffic in shopping centres has remained soft, the strength of our store teams was once again illustrated by consistently high sales conversion rates in our stores. We also continued to see channel mix normalise post COVID lockdowns.”

Throughout the second half of the financial year, dusk has continued to open new stores, expecting to reach a total of 145 stores by the end of FY23. This represents an increase of 13 stores compared to FY22. The performance of these new stores aligns with the Company’s expectations.

But whether more stores would urge consumers to buy $40 candles remains unknown. 

King commented, “Our total sales and Pro Forma EBIT in FY23 will still be well ahead of pre-COVID levels, and the EBIT margin in FY23 of around 12% is solid. However, many consumers are feeling significant strain on their household budget, and we are taking the actions necessary to mitigate the financial impact of this difficult environment continuing.”

Amid declining profits, King is set to step down from his role as CEO with dusk having found a new CEO and Managing Director, Vlad Yakubson. Yakubson has worked at Mad Mex, Glue and the Retail Apparel Group promoting menswear. He will be paid $555k per annum at dusk and is set to join by October 31, 2023. 

The Company remains committed to investing in product innovation across its entire range, maintaining a focus on pricing, margin, and cost discipline. Furthermore, dusk’s inventory position is reported to be clean and well balanced. The Company is currently relying on its business fundamentals, including its category leadership, vertical retail model, and the unique dusk Rewards paid loyalty program.