Jun 24, 2024

Sentiment: Bearish

Type of Trade: High Growth

Industry: FASHION

Sector: Consumer Discretionary

Cettire is an Australian-owned, online luxury fashion retail platform selling clothing, shoes and accessories from over 1300 international high-end fashion brands. The firm offers women’s and men’s wear from brands such as Prada, Gucci, Saint Laurent, Balenciaga and Valentino. The company was founded by Dean Mintz in 2017 and is headquartered in Melbourne, Australia and had breakthrough due its innovative and adaptable approach to millenium consumers.

The key competitive advantage components of Cettire are:

  • No inventory business model, delivering capital efficient growth and compelling risk rewards.
  • Global growing TAM, with structural tailwinds and increasing penetration in multiple markets.
  • Proprietary Technology, enabling exceptional scalability for customer acquisition and automated order fulfilment.
  • Entrenched and diverse relationships with suppliers, providing secure access to huge brand catalogue.
  • Although some of directors has recently sold some shares, Cettire is foudner-led, dedicated management team with strong track record of sustained growth and cash generation.
  • Continue to optimise mix of customer acquisition investment across established (top-3) and emerging markets
  • China expansion and Beauty launch timeline adjusted to FY23.
  • Impressive unit economics (high AOV) and increasing repeat customer spend (growing LTV).

🚩 Risk of supply closing from the brand owners in order to protect its brand equity which is small but possible.

✅ 1HFY24 reported 90% growth in gross revenue from PCP of $460.5 million, and 58% of gross revenue was from repeat customers. In Q3 FY23, we expected revenue to increase over $300 million in conservative terms, and the company has beaten our expectations, reporting incredible revenue growth to $416.2 million. We are expecting a strong result for the full year 2024, potentially, the revenue will be double what was reported in FY23.

✅ Active customers are up 83% to approximately 576k, with further growth acceleration since Sep-23 with record quarterly gross and net adds in Q2 FY24.

✅ Statutory NPAT of $12.8 million in 1H FY24.

✅ Adjusted EBITDA in 1H FY24 of $26.1 million.

✅ Net Cash of $100m vs $46m at 30 June 2023.

✅ The company continued its expansion into new markets and verticals, including broadening its geographical revenue, increase penetration in emerging Markets such as in China, also extending to new adjacent verticals.

✅ Beauty category expansion. This category is a huge highlight, as worldwide revenue from cosmetics is currently a $100 billion industry, and the personal luxury goods market is expected to be around a $600 billion global industry in 2030.

On 27 May 2024 – The Company has firmly denied these claims, which appear to be motivated by parties with short positions in Cettire shares. These allegations are based on an unverified report commissioned by a short seller, which Cettire was not given a chance to review, says the company.

Cettire categorically rejected the unfounded allegations regarding the sale of non-genuine products.

As per today’s note to the market, the Company said that maintains a robust and transparent supply chain and has a proven track record of delivering authentic luxury goods.

The high level of repeat customers and positive retention metrics highlight Cettire’s success in meeting customer expectations and strengthening customer loyalty.

Recent Update has triggered 40% sell off on the stock

Potential Reasons for the Sharp Decline:

Market Overreaction:

Negative Aspects

🚩Short-term sentiment reacting strongly to immediate challenges like softening demand trends, increased promotional activities, and higher marketing costs.

🚩Concerns About Margins and Costs:
Increased marketing costs relative to sales and a decline in delivered margin percentage raised red flags about profitability and cost management.

🚩Challenging market conditions, particularly softening demand and clearance activities, heightened concerns about future performance.

🚩Broader Market Sentiment:
Broader market conditions or macroeconomic factors, such as global economic uncertainty or sector-wide sell-offs, might also be influencing the stock’s performance.

Evaluation of the Report

Fundamentally there is nothing wrong with the company’s recent update and it is in line to the current growth we have seen on this stock.

Positive Aspects:

✅ Strong year-on-year growth in sales revenue and Adjusted EBITDA.

✅ Successful launch in the Chinese market, opening a significant growth opportunity.

✅ Improved customer retention and stable conversion rates in key markets.

Supporting Arguments for Market Overreaction:

  • Strong Growth: The company is still demonstrating strong revenue and customer growth.
    Significant year-on-year growth in active customers, sales revenue, Adjusted EBITDA, and cash for FY24.
    Expected sales revenue between A$735 million and A$745 million, showing a growth of 77-79%.
    Adjusted EBITDA expected to be between A$32 million and A$35 million, a growth of 24-36%.
  • Strategic Moves: The entry into the Chinese market is a strategic move that could yield significant long-term benefits.
  • Operational Efficiency: Despite increased costs, the company maintains a strong operational foundation and a capital-light model.
Our Conclusion about the recent sell off

A 40% decline in stock price, in light of the report’s mixed but largely positive outlook, suggests that investors might be overreacting to short-term challenges and trigger short traders once again. Long-term investors might view this as a incredibly positive buying opportunity, betting on the company’s strategic initiatives and growth potential to drive future recovery and performance. The risk still on short trading activities and high interest rates environment, and this is not a stock for conservative traders.

Outlook for H2 FY24

The company reported a positive outlook for 2H FY24, with a healthy demand environment across its geographic footprint.
Centtire will continue to operate the business to maximise profitable revenue growth whilst also self-funding with adjusted EBITDA profitability to be maintained. The company also reported that near term investment priorities are customer acquisition, technology investment, and building organisational capability.

Technically Analysis

If you’ve been holding shares of Cettire Limited (ASX: CTT) over the past year, you would have witnessed a significant 58.86% decline in your investment, reflecting the challenges faced by the company. Our strategic trades on CTT in 2023 yielded a 35% profit for our VIP Members, highlighting the stock’s potential despite recent setbacks. However, recent developments have drawn significant attention to Cettire, particularly from short traders following tax inquiries initiated by Texas authorities.

Being predominantly active in the US, especially Texas, Cettire now faces heightened scrutiny regarding tax matters. According to Bloomberg, Texas issued a notice to the company in February, citing approximately $US10,000 ($15,200) in unpaid taxes, excluding sales tax. Cettire’s response to the notice underscores its commitment to regulatory compliance.

Despite believing the assessed amount to be incorrect, the company promptly engaged with the authorities to address the issue, ultimately opting to pay the full amount on March 21. Subsequently, Bell Potter’s unexpected downgrade significantly impacted Cettire, resulting in a notable 16% decline in its share value. The brokerage’s in-house analyst ceased recommending clients to invest in the luxury marketplace, reflecting the seriousness of the situation.

This downgrade coincided with growing concerns surrounding Cettire’s market capitalization, spurred by inquiries initiated by The Australian Financial Review regarding its regulatory obligations in key markets such as Australia and the United States. The intensifying scrutiny on Cettire, compounded by queries on its tax registration status, prompted further unease among investors. This series of events led Bell Potter’s Chami Ratnapala to downgrade Cettire’s rating from “buy” to “hold” and adjust the 12-month share price forecast from $4.80 to $4.50. Ratnapala’s communication with clients indicates an anticipation of impending challenges for Cettire in achieving its earnings targets.

Given that the stock is currently trading at a technically fair price of $1.30, it suggests that entering a position in the stock around or below the long-term trend could be considered an effective entry point, offering potential opportunities for investors. Considering the stock’s current price and the confirmation of these tax issues, we believe the optimal approach is to acquire this stock at a technically discounted price for minimal risk.


  • Capital Flow into the stock
  • Entry Prices
  • Risks
  • Targets BGS20 and BG Trading, Stop loss.
  • Shareholders trend.

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