The wheels well and truly fell off the finances of luxury online retailer Cettire (ASX:CTT), and investors once again punished the former high-flyer with another market pounding on Thursday.
Cettire has become a battleground for shorts and bears, with many sceptical about its financials and business model. Every report is closely examined for weak or bad news, particularly regarding product availability, sourcing, and the performance of key markets such as China.
On Thursday, another red flag emerged as the financial results had not yet been signed off by the company’s auditor, increasing concerns about the company. The shares fell nearly 25% at one stage on Thursday after the company revealed very weak figures.
The shares later recovered but were still down 12% by midday, only to fall again in the afternoon, ending down 18% by 2:30 p.m.
Cettire made a net profit after tax of $10.4 million, down 34% from 2022-23’s $16 million, as it slashed prices on its luxury goods stock to cut costs. However, its preferred profit measure, adjusted EBITDA, totalled $32.5 million for the year to June, up 10% from $29.3 million in 2022-23.
A closer look at the company’s second-half performance shows adjusted EBITDA growth slumping, with the company earning $6.4 million in the six months to June this year, compared to $12.6 million in the same period of 2023.
This was on revenue of $742 million, slightly above recent guidance and up 78% year on year. Second-half revenue grew strongly, but it seems Cettire sacrificed profit margins to shift stock quickly and reduce its interest costs.
The company conceded that the luxury retail market had softened substantially in the last quarter of the financial year, forcing Cettire to increase its promotional discounts and advertising spend. Marketing spend more than doubled from the year prior to $75.7 million, while customer acquisition costs jumped to $130 per customer from $96.
Interest costs ballooned from $247,239 in 2022-23 to just over $2.08 million in the latest year. As a result, gross margins fell from 23% to 20.9%, in line with the guidance provided in its last update.
The company stated it ended the financial year with $79 million in cash, down sharply from around $100 million at the end of last December, but still with no debt. Active customers grew to 692,000, and the company processed almost 1.2 million orders.
After heavily touting its much-anticipated launch into China in the June quarter, Cettire had no update for shareholders on Thursday. It merely stated in its investor presentation that it was “taking a measured approach” to the market and looked to broaden its proposition over time.