By: Chris Batchelor
My last two blog posts have focused on stocks that meet the criteria for the screen developed by Stockopedia contributor Roland Head, as outlined in his recent article titled “Screening for Warren Buffett stocks: the ultimate strategy?”, Roland created a screen that he believes would closely mimic the approach Warren Buffett uses to choose stocks that are likely to be great compounders. When that screen is applied to the Australian and New Zealand market today, only 10 stocks make the cut. So far I have written about Universal Store Holdings (ASX:UNI) (read here) and NZE listed Mainfreight (NZE:MFT) (read here). Today I will take a look at candlestick maker Dusk (ASX:DSK).
Dusk is a retailer of candles and other home fragrance products. They design their own products and sell them through their network of stores as well as online. They are not sold through other stores or market places. Candles are their biggest product however 64% of sales come from other products with diffusers and scented consumable refills rapidly catching up to candles.
Dusk underwent an IPO in November 2020. The price soared from $2 to $4 in the first eight months but then began a steady decline. The driver of this initial growth was strong sales during the pandemic which resulted in four trading updates during their first six months as a listed company, each revealing a further improvement in results.
Revenue hit $149 million in 2021. It is anticipated that revenue will be $140 million in 2023, a decline of 6% from the peak, but still 40% higher than in 2020. The pandemic led to a trend where people were spending more money sprucing up their homes. Things have largely normalised now with travel and entertainment now back on the agenda, but Dusk have managed to lock in a large portion of the gains made during that unusual time.
They are continuing to grow their store network which numbered 141 as at December 2022. They opened nine stores in the first half of FY23 and are aiming for six more in the second half. Online sales accelerated during the pandemic to 8.3% of total sales but have now retracted to 5.6%.
Dusk is a profitable business. Profits grew very strongly until 2021. In 2022 they eased back a…
