Why did the Dusk share price flame out 16% in June?

Dusk shares encountered a difficult month of trading brought on by external market factors.

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Key points

  • Dusk shares sank 16% last month following unfavourable market conditions brought on by strong inflationary movements
  • In response, the Reserve Bank of Australia increased the official cash rate which ultimately puts downward pressure on consumer spending habits
  • The broader S&P/ASX 200 Consumer Discretionary (ASX: XDJ) sector also declined 7% in June

The Dusk Group Ltd (ASX: DSK) share price continued to dim throughout the month of June.

At market close on 31 May, the specialty retailer's shares last traded at $1.99 a pop. Fast forward to the end of June, its shares closed at $1.67, representing a decline of 16% for the month.

After falling into bargain territory, Dusk shares are staging a strong rebound today to zip 6.99% higher, back to $1.99 apiece.

What blew the wind out of Dusk shares?

Investors dragged down the Dusk share price amid negative sentiment across the ASX in June.

After inflation levels spiked to 5.1% during the March quarter, the Reserve Bank of Australia (RBA) decided to intervene.

The central bank tightened up its monetary policy by raising interest rates in a bid to cool down the rampant inflation.

The official cash rate rose by 0.5% last month and another 0.5% yesterday – which currently puts it at 1.35%.

Around the country, prices on consumer goods were noted to have surged at the fastest annual pace over the last 20 years.

What this means is that consumers are less likely to spend on discretionary items while interest rates are picking up. The cost of debt, such as credit cards as well as personal loans, requires extra payments which, in turn, affects consumer spending habits.

Nonetheless, a gloomy economic outlook is also weighing down the S&P/ASX 200 Consumer Discretionary (ASX: XDJ) sector. The index fell 7% over the course of June.

While Dusk hasn't made any announcements recently, investors will be keeping a close eye on the upcoming monthly household spending report. This provides a clearer indication of household spending as well as the health of the country's economic growth.

Dusk share price snapshot

It has been a disappointing 12 months for the Dusk share price, falling by almost 50% for the period.

When looking year to date, the company's shares are down around 38%.

Based on today's price, Dusk commands a market capitalisation of roughly $115.82 million.

Motley Fool contributor Aaron Teboneras 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 recommended Dusk Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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