Down 40% in 2024, why is this ASX small-cap stock rocketing 32% today?

The market may be falling today but that hasn’t stopped one beaten down ASX small cap stock from rocketing.

Prior to today, Dusk Group Ltd (ASX: DSK) shares were down over 40% since the start of the year.

But much to the relief of the retailer’s long-suffering shareholders, the company’s shares are up 32% to 78 cents today.

Why is this ASX small cap stock rocketing?

The catalyst for this has been the release of a trading update from the specialty retailer of home fragrance products.

According to the release, the company’s sales run rate continued to improve on a monthly basis in the second half.

This culminated in positive sales growth of 0.4% for the last five weeks of the financial year compared to the prior corresponding period.

This led to its second half sales falling 5.8% on the prior corresponding period, which is a nice improvement on the 9.7% sales decline recorded in the first half of FY 2024.

For FY 2024, total sales are expected to be down 8.2% to $126.3 million and underlying EBIT is expected to be $6.2 million to $6.4 million (from $16.5 million in FY 2023).

What drove the improvement?

Management notes that the improved sales performance in the second half reflects the implementation of various strategic initiatives.

These strategic initiatives focused on product rejuvenation, tactical and disciplined promotional activity, and enhanced execution of its online channel following the website relaunch in June 2024.

It also notes that its position as a gifting destination was highlighted during the Mother’s Day week, with total sales up 10.4% on the same period last year. It believes this is an indication that its refreshed product range is resonating well with customers.

Also likely to be going down well with investors is commentary relating to the ASX small cap stock’s gross margin. Management advised that it was diligent in maintaining its gross margin in the second half through focused promotional activity and supply chain management.

As a result, its gross margin rate for FY 2024 is expected to be broadly in line with the prior year (FY 2023: 64.1%) despite headwinds from freight and distribution costs.

The company’s CEO and Managing Director, Vlad Yakubson, was pleased with the improvements. He said:

FY24 has been a time of transformation at dusk as we laid the foundations for the rejuvenation of the business, with significant changes made to the leadership team over the past 12 months. The executive team brings new ideas and fresh perspectives to trading the business and developing products that appeal to our customers. In 2H FY24, we have progressively arrested the sales decline and more recently moved into positive growth.

Looking ahead to FY25, we are in a strong financial position and our inventory is clean and well balanced. We continue to focus on delivering product innovation and the latest trends to our customers on a regular basis.

The post Down 40% in 2024, why is this ASX small-cap stock rocketing 32% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.