Challenging conditionsWith -15% LFL sales, there will be a...

Challenging conditions

• With -15% LFL sales, there will be a sizeable reduction in overall revenue for 2024 vs 2023. If they open 12 new stores over the full year, which may not actually occur given the outlook, that represents store growth of 8.3% on the 145 existing stores. Therefore, total revenue may still drop by around 7% which would put FY24 at around $128 million in sales.
• Assuming gross margin remains 64.1% - which is at risk if $AUD continues falling. Gross profit in 2024 would be $82 million.
• The additional stores combined with the 8.6% rise in minimum wage that flows through in 2024 (I'd expect this impacts Dusk) will lead to substantially higher CODB. Even with the $2mil reduction to CODB - it's hard to see how CODB doesn't increase by 8.3% in line with store openings (at a minimum) which would put CODB at $73.5 mil in 2024.
• EBIDTA would then be crunched to $8.5 mil with EBIT of around $4.5 mil. NPAT $3mil or 5 cps.

If anyone sees a different financial picture then feel free to lay it out and justify your position.

I'm confident there will be a good time to invest in DSK, I just see the future as too uncertain and too many risks. Whilst interest rates have peaked, there is a tsunami of lower fixed rates rolling to higher variable rates which will continue to pressure discretionary spending of middle-class families. The RBA is stuck between a rock and a hard place - even if they want to reduce interest rates, they also need to maintain stability in the $AUD - which all points towards rates remaining higher for longer. Once this picture changes I'll be back in DSK.

This is not financial advice.