)
All of the extraordinary share price gains made by Melbourne-based Cettire (ASX: CTT) since late 2022 have been wiped out today after the online luxury goods retailer's founder Dean Mintz revealed a recent softening of demand and the impacts of clearance activity.
The dropshipper, which has been subjected to short selling attacks and allegations that non-genuine products are sold on its platform, led with a mostly upbeat message in an update to the ASX this morning emphasising the company's long-awaited launch in China took place over the weekend.
However, this was overshadowed by earnings guidance for FY24 of $32-35 million falling short of consensus forecasts by at least $10 million - a level that would still represent growth of at least 24 per cent year-on-year.
But the bloodbath that ensued was far more extreme than the gap between market expectations and reality, with the volume of 24 million shares traded at the time of writing being around seven times Cettire's daily average.
CTT shares have lost more than 48 per cent of their value at the time of writing, signifying a $411 million shaving of its market capitalisation.
The decline itself is more than double Cettire's market valuation of $190 million when it listed on the ASX at the end of 2020.
Mintz said the company had observed more challenging market conditions since April.
"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," he said.
"Additionally, we believe the market is currently being impacted by clearance activity as certain players exit parts of the market."
He said that to continue to expand market share, Cettire had selectively participated in the promotional activity, leading to an "increase in marketing costs relative to sales and a decline in delivered margin percentage".
"Despite a recent softening of market conditions, the overall opportunity in online luxury remains compelling, supported by industry consolidation," he said.
"Cettire is well positioned to capitalise on the opportunity in online luxury given the resilience and flexibility of its business, which is underpinned by a large and diverse supply chain, geographic diversity and a capital light model with minimal inventory risk.
"The company continues to grow rapidly, is profitable and cash generative. Cettire has access to extensive inventory levels and remains focused on maximising profitable revenue growth, whilst also self-funding."
)
