I have come in late on this thread but wanted to weigh in on the...

I have come in late on this thread but wanted to weigh in on the shaver shop comparison. I think it says a lot about how the market has treated the two different companies. As has been pointed out there are similarities namely similar size as measured by MC, seasonality of business, current single digit PE and high div yield.

So so why does DSK SP under perform over past 12 months or so?

i believe there are a few reasons:

1. Mean reversion - think about the pandemic period and peoples behavior. Dusk benefited from the stay at home cocooning period. As a comparison I’m not sure as much shaving took place. As we reopened drinks and mortar retainers, fashion entertainment food etc benefit while dusk normalizes. The shareholders who don’t get the mean reversion get worried particularly if they bought during the ‘pandemic surge’

2. Rising interest rates - while this is expected to harm discretionary retailers dusk has no history as a public company during a down cycle. Many fund managers don’t buy into companies for the first 5 years after ipo due to the lack of historical financials and retailers particularly are judged how they went through the previous crisis.

3. CEO exit - both unexpected and untimely given the macro environment. Always a red flag for fund managers. While there is a notice period playing out here and the business in in a good position it seems odd to leave so soon after the ipo and entering uncertain retain environment.

4. Director and large shareholder sale - this is mentioned in this thread already but I believe trent Peterson share sale of 4.4m share at 1.80 back in early dec22 was always going to come at some point in time due the nature of these funds. Essentially he helped finance the company in the rapid store roll out up to the ipo and was looking at the next trade for that capital. Presumably given the share market pull back and generally tighter capital markets there are plenty of opportunities. Problem for DSK shareholders is the optics of that followed by the ceo leaving.

So so on balance my view is that the current share price is loaded with the unfavorable known issues as well as the general unfavorable sentiment toward discretionary retailers and the lack of track record. If you look through the current downturn and think about a total shareholder return over next 5yrs I would say we could do 100% return on 1.50 investment now. That could be 75c in div and 75c in SP gain or 100c in gain and 50c in div or 100c in div 50c gain it really does not matter to me as the mix of that 150c target return will likely depend on store roll out and the individual store profitability dynamic as to whether capital is reinvested or returned to shareholders. My level of conviction here is pretty high as Dsk has the benefits of a 67% gross margin which should help there overall unit profitability. You can see that despite the cost of doing business rising from 39% to 42% they still were able to have and EBITDA of 24%. Considering the CODB ratio from 1H22 enjoyed the benefit of the pandemic spike as well as the new stores take some time to ramp up their sales with high fixed cost I would see the profitability metrics improve with time all else being equal.

I would welcome challenging views on this thesis