I actually like this one.
It has ADH/LOV DNA infused in it (all Brett Blundy bastard children, injected with his seeds no doubt). A few small clues:
1. $10 membership cards (which ADH does too) - which give members like $0 benefits but boosts gross margins / collects data / increase ARPU. Getting customers to pay for membership is genius, I don't know why more stores don't do this.
2. Gross margins - they are effectively selling expensive white-labelled products. Everything is basically "Dusk brand" designed in-house, and manufactured cheaply in China - its an arbitrage that works, coz women value the "in shop experience" and "the Dusk brand". Same as LOV, same as ADH. They don't pay a distributor and they don't pay for someone else's gross margins. If you look at the last 5 years earnings, they have maintained gross margins despite FX headwinds (this demonstrates pricing power and/or ability to negotiate suppliers' prices down as they scale)
3. Owns a niche in the retail market (there's basically no direct competitor apart from Perfect Potion which is sub-scale) - same playbook as ADH/LOV
4. Recent IPO risk - BB typically leaves some money on the table - I suspect he does this to ensure the market will always let him IPO other businesses in the future. People used the same argument when ADH IPO'ed or when LOV IPO'ed. So I'm inclined to give some benefit of doubt.
5. Captive audience (diffusers cost $100-200 bucks, and then you need to refill it with like ~90% gross margin oils, 2 for $20 every 3-4 months). I swear this stuff is addictive, coz it calms women down. Every customer is basically stuck - they don't want cheap oils, they want to smell the oil that makes them feel good. Then they put another diffuser in a 2nd room and they need to pay another "oil subscription". This stuff is evil.
6. People's relationships with their homes have changed (WFH and all the streaming tech has made people love spending time in their homes). They are spending more time & money on their homes
7. Home building - approvals are at record high. More homes, more evil diffusers - I am keeping my wife away from DSK.
8. NZ - BBRC left us one carrot - that's NZ, which is another state of Australia, basically.
9. International - for the market to continue to love DSK, they need to dangle another carrot. Same as what ADH is doing.
In summary, DSK is a poor man's ADH (which has better online offering) and a poor man's LOV (which has higher gross margins, better $$ per m2, and international strategy bearing fruit).
7/10 biz, 8/10 price, 9/10 mgmt.
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