Looks like luxury customers are reviewing their purchases, with fewer people willing to buy a $20 candle to spruce up their space. Home fragrance retailer dusk Group (ASX: DSK) reported a 6.9% decline in revenue on FY21 to $138.4 million. Moreover, the Company’s profit is down over 7% from over $100 million to $93.7 million.
According to dusk, there’s a sole reason behind its poor financial performance: Government-mandated store closures that reduced trading days by approximately 24%. Not the fact that fewer people were willing to buy its products, given that new sign-ups and renewals for its Rewards membership fell by nearly 15%.
Active membership in its loyalty program dusk Rewards increased by 9.7% on FY20 to over 755,000 members, with the average transaction value for members up 4% year-on-year to $60—materially higher than non-members. Members accounted for 62% of the Company’s total sales.
However, in the past year, new sign-ups and renewals for Rewards membership and sales fell from over 400,000 in FY21 to around 360,000 in FY22.
Still, to account for a silver lining, the Company reported that on a two-year basis, FY22 sales were 37.3% higher on FY20.
Total Like for like sales (LFL) decreased by nearly 11% in stores, while online sales picked up by over 2.9% to $11.6 million. Dusk’s eCommerce arm represented 8.3% of total sales. In August 2021, the Company launched an upgraded website, and it tried out a Click & Dispatch (ship from store) model in the second half with a full rollout planned in FY23.
The Company is “optimistic about the potential benefits of exposing a much larger portion of our total inventory holding to the online channel” and expects it to improve the overall online shopping experience.
CEO and Managing Director Peter King commented, “Although total and LFL sales were lower in FY22, we achieved strong results for Christmas and Mothers’ Day, and pleasing growth on a two-year basis (i.e. since FY20).”
“Importantly, we feel we consolidated the step change in sales and earnings of the business compared to the pre-pandemic period. We continued to prioritise long-term growth, opening ten new stores in Australia, extending our online retailing capabilities, and laying the groundwork for our expansion into New Zealand.”
For the first eight weeks of FY23, total sales are up 33.2% to $4.2 million. The Company reports that customers are returning to stores and online sales are declining. Pointing to the fact that members typically sign up in stores, it expects to grow member numbers with expansions and more festive offerings.
King added, “We expect to open a further five stores in Australia before Christmas. We have also committed to open our first three stores and a new website (duskcandles.co.nz) in New Zealand across September and October 2022.” The New Zealand expansion would be dusk’s first foray outside Australia.
At year end, the Company boasts 132 stores, with 10 new ones under its belt. Whether home fragrances top a customers’ shopping list for a new season is yet to be ascertained, as dusk is unable to provide earnings guidance for the year forward.
Alinda is a Business Reporter for The Sentiment
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