Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dusk Group Ltd (ASX:DSK) reported a 12.3% increase in total sales, marking their best first half result outside of COVID.
• Online sales surged by 68%, now representing 7.9% of total sales, indicating a successful enhancement of their omni-channel offering.
• Gross profit increased by 13.4% to 56.9 million, with a gross profit margin improvement of 62 basis points to 65.1%.
• The company declared an interim dividend of $0.05 per share and a special dividend of $0.05 per share, both fully franked.
• Dusk Group Ltd (ASX:DSK) maintained a strong financial position with a closing cash balance of 38.5 million and no debt.

Negative Points

• The decline in Dusk Rewards members reflects a churn due to the high number of memberships initiated in the previous period.
• Cost of Doing Business (CODB) increased by 12.2% due to mandatory wage and occupancy cost increases, as well as investments in digital marketing.
• The average transaction value (ATV) for new customers is lower compared to loyalty customers, impacting overall sales metrics.
• Macro conditions remain uncertain, with customers navigating cost of living challenges, which could affect future sales.
• The company plans to close two stores in the second half of FY25, which may impact physical store presence.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with ASX:DSK.

Q: How does Dusk plan to drive higher transaction values from new customers, especially considering the lower average transaction value (ATV) of new customers compared to loyalty customers? A: Vlad Jacobson, CEO: We expect the ATV to normalize in the next 6 to 12 months as we continue to acquire new customers, particularly younger ones. As these customers engage more with our bath and body category, they are likely to become recurring customers. We are also focusing on product innovation and add-on basket value options to increase ATV. The decline in ATV has stabilized, and we anticipate growth as we move past the COVID-related churn.

Q: What is the future outlook for the bath and body category, and how does it fit into Dusk's overall product strategy? A: Vlad Jacobson, CEO: Bath and Body is a strategic part of our expansion plan, now representing 5% of our product mix. We plan to continue growing this category as it aligns with our strategy of increasing customer frequency. The category has moved past the test and learn stage, and we will keep expanding it until customer feedback suggests otherwise.

Q: How did the sales trends play out over the recent months, and what is the impact of Easter timing on sales? A: Vlad Jacobson, CEO: December was strong, especially during Black Friday, but January was quieter, which is typical for Dusk. Sales picked up again towards the end of January with new product launches. Easter timing is not expected to significantly impact sales compared to last year, as Mother's Day is a more significant event for us.

Q: Can you provide more details on the cost of doing business (CODB) and the impact of pop-up stores? A: Gordon Squire, CFO: The increase in CODB is largely due to additional marketing investments, which have shown a strong ROI. Pop-up stores had minimal impact on CODB, as they were operational for only seven weeks with limited cost implications.

Q: What are Dusk's plans regarding potential opportunities in the wholesale market, considering the success of the bath and body category? A: Vlad Jacobson, CEO: We are focused on our core product rejuvenation strategy over the next 6 to 12 months. Once we have a solid product base, we see opportunities in wholesale and possibly international markets. The bath and body category shows encouraging signs, and we will continue to explore its potential before considering expansion into new ventures.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.