Cettire shares dive on implied Q4 earnings loss
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More news: Cettire shares plunged at market open on the ASX after the luxury e-commerce platform warned of challenging operating conditions during its fourth quarter.
Shares were down 40% to $1.35 by 10:30am AEST.
RBC Capital Markets analyst Wei-Weng Chen noted that the low end of Cettire's EBITDA guidance now implies a loss-making fourth quarter.
Given the company's lean operations of around 70 staff, there may be limited recourse for self-help should challenging operating conditions persist, he warned.
Chen also flagged that the mid-point of Cettire's new FY24 revenue guidance implied that Q4 sales growth had slowed to around 53% compared to the prior corresponding period, and 88.2% compared to the previous quarter.
What they said: "Interesting to us, this is the first time [Cettire] have noted impacts from the external operating environment on financial performance with management citing higher-than-usual promotional activity in 4Q," Chen said.
"Aside from the near term impacts to [Cettire]'s earnings, we view this commentary as negative to the bull thesis that [Cettire] could be beneficiaries as other online luxury retailers are exiting."
Cettire warns on financial impact due to 'challenging environment'
The news: Luxury e-commerce platform Cettire has warned that its fourth quarter FY24 financial performance has been impacted as the global online luxury market "has become more challenging".
The numbers: Cettire has reported an FY24 guidance of adjusted EBITDA to between $32 million and $35 million, well down from consensus expectations of $44 million.
The company said it expects FY24 sales revenue to come in slightly down at $735 million to $745 million, representing year-on-year growth of 77% to 79% ($416.2 million).
The context: Cettire noted that the operating environment within global online luxury had become "more challenging" during the "last several weeks".
It said that "multiple listed luxury businesses" described softening demand trends and increased promotional activity, "over and above" the typical seasonal promotions, leading to a tougher margin environment.
"Cettire's financial performance for Q4 FY24 to date has been impacted by these developments," the company said.
Cettire said its marketing to sales ratio was in "low double digits per cent" but did not give any figures.
The company also announced its China launch and said the country was an "important strategic opportunity".
What they said: Cettire's founder and CEO Dean Mintz said: "Since our market update in mid-April [...] we have observed more challenging market conditions.
"A softening demand environment and an increase in promotional activity has been visible across our footprint, particularly in the last several weeks as the market has entered the Spring Summer 24 sale period.
"Additionally, we believe the market is currently being impacted by clearance activity as certain players exit parts of the market.
"To continue to expand our market share, Cettire has selectively participated in the promotional activity, leading to an increase in marketing costs relative to sales and a decline in delivered margin percentage."
The sources: ASX announcement, RBC Capital Markets research
