Poor Mother’s Day sales and a cautious consumer has triggered a sales and profit slide for dusk

Cautious consumer spending has been blamed for draining the retailer’s sales and earnings, which it now expects to be 40 per cent below the previous year.

Poor Mother’s Day sales and a cautious consumer has triggered a sales and profit slide for retailer dusk.

A softer consumer environment driven by rising interest rates and the cost of living coupled with disappointing Mother’s Day sales has extinguished the earnings momentum for candles and fragrances retailer dusk Group.

Dusk now expects its 2023 earnings to be as much as 40 per cent below the previous year.

The earnings downgrade and revelations of a poor recent trading performance over the key Mother’s Day celebrations caused shares in to dusk plummet by almost 20 per cent.

On Friday dusk said that with 45 weeks of the financial year complete it had decided to update the market on its performance.

It said fiscal 2023 sales were expected to be in the range of $135m to $137m, which compared with $138.4m in 2022.

Pro forma pre-tax earnings was expected to be in the range of $16m to $17m, compared with $26.5m in 2022.

The gross margin rate for 2023 was expected to be broadly in line with the previous year.

Dusk, which has 141 stores across Australia and New Zealand as well as an online platform, blamed the drop in earnings on the “cautious consumer environment” as its core shoppers bought fewer candles, fragrances and homewares.

This was particularly evident in disappointing Mother’s Day sales this year.

Chief executive Peter King said trading conditions in the second half of the year were impacted by an increasingly cautious consumer environment, driven by higher interest rates and mounting cost-of-living pressures.

“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,” he said.

“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.”

Mr King said the retailer’s total sales and EBIT in 2023 would still be well ahead of pre-Covid-19 levels, and the EBIT margin in 2023 of about 12 per cent was 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,” he said.

“We continue to invest in product innovation across our entire offer. We remain laser focused on pricing, margin and cost discipline, and our inventory position is clean and well balanced.

“Despite the challenging macro environment, we draw confidence from our business fundamentals including our category leadership, vertical retail model and unique dusk rewards paid loyalty program.”

Shares in dusk closed Friday’s trading down 28.5c, or 18.8 per cent, at $1.23 which was an all-time low.

Dusk floated on the ASX in 2020 with an issue price of $2 per share.