Shares in luxury retailer Cettire collapse on weaker demand outlook

Shares in Melbourne-based online retailer Cettire have plummeted after bracing the market for a potentially unprofitable final quarter due to weaker demand for luxury clothing.

At the same time as confirming a big launch into the huge high-end market of China, the Dean Mintz-founded company told the market on Monday that the global online luxury environment it operates in had become “more challenging” in the past few months.

Cettire’s before tax earnings last year of $29.3 million, which had grown from $21.5 million the year before that, are expected to land in a band of between $32 million to $35 million range for 2024, according to the update.

Cettire’s unaudited year to date earnings were $32.1m back in April, while sales revenue of $545.2m also from April is expected to come in at between between $735m to $745m when the financial year ends this week.

The company said results to-date had also been “impacted by these developments”. The update was enough to spook Cettire’s share into a nosedive of more than 48 per cent, leaving shares to trade at $1.14.

Founder Mr Mintz told investors repeat customers “were growing” and that the Cettire proposition, selling a broad range of discounted designer clothing and accessories online, was resonating with them.

But he said more “challenging market conditions” meant Cettire had been spending more on marketing and promotions to keep pace with rivals also offering seasonal sales.

“Since our market update in mid-April, however, we have observed more challenging market conditions,” he said.

“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 combination has put pressure on the margins, Cettire said.

At the same time Cettire is about to launch its business in China, considered the largest luxury market in the world. That will also likely call for more marketing and promotional spending, though Mr Mintz said the comapny would be “measured” in its approach to market and broaden sales channels over time.

Cettire sells products from more than 2500 luxury brands, including Gucci, Christian Dior, Givenchy and Burberry but doesn’t keep the inventory on-hand, instead sourcing products from third party suppliers.

It has become a closely-watched stock on the ASX after its share price rocketed from $1.39 to $2.90 in the space of 12 months, but has also had to fend off questions over tax obligations and the sustainability of its business model.