Cettire shares plunge to two-year low with earnings in the red and softening US demand

Shares in Cettire (ASX: CTT) have fallen to their lowest levels in more than two years after the luxury products dropshipper's earnings swung into negative territory in the March quarter, despite an 8 per cent lift in active customer numbers to almost 700,000 people.

The Melbourne-based group reports a persistence of softer demand in the global personal luxury goods market, including in its largest market the USA where Cettire has observed volatility in daily sales, even on items that are not subject to duties.

While gross revenue held steady with a slight increase in 1 per cent to $260.1 million, Cettire's adjusted EBITDA went from $6 million for the same period in 2024 to negative $4.7 million for the recent quarter.

Cettire would have still been in the red even without its $2.1 million foreign exchange loss due to volatility in rates between the euro and US dollar.

This represents not only a drastic change in Cettire's bottom line over the past year, but also since the December half when it recorded a positive $12.1 million adjusted EBITDA.

The company has previously revealed that 41 per cent of its gross sales in the US market were from EU-made goods, which are currently subject to a 10 per cent tariff but are slated to rise to 20 per cent when a 90-day pause on so-called reciprocal tariffs comes to an end in the first half of July.

Cettire also believes there will be a more direct impact, albeit to a lesser extent than that of softening demand, from new tariffs on the sale of China-manufactured items into the US, which represented 3.8 per cent of the group's gross sales in the March quarter.

Goods made in China are currently subject to a 145 per cent tariff in the US, although the US President has recently stated tariffs would come down "substantially".

It is also worth noting that there is now a De Minimis Tax Exemption loophole on shipments worth less than US$800 per person, per day, but this is due to end on 2 May, 2025.

Amidst these challenging conditions, Cettire implemented a series of cost initiatives during the March quarter to drive run rate improvements in variable costs, across fulfilment, merchant fees and IT, totaling more than $5 million at current volumes.

"The operating environment within the global personal luxury goods market since Cettire’s H1 FY25 results has remained volatile, with softening underlying demand evident across all geographies," says Cettire founder and CEO Dean Mintz.

"Following a profitable first half, Cettire placed an increased emphasis on market share in the third quarter. While revenue growth was not maintained at H1 FY25 levels, Cettire’s growth is likely to outperform the luxury sector with recent industry results and guidance demonstrating negative growth across a number of brands in the March quarter.

"With Cettire’s increased emphasis on market share and, against a backdrop of persistent sector-wide promotional activity to stimulate demand, the company continued to participate in promotional activity throughout the quarter, resulting in a reduction in delivered margin as a percentage of sales compared to H1 FY25.

"At the same time, Cettire moderately increased its investment in marketing compared with the first half with marketing costs as a percentage of sales of above 8 per cent."

At the time of writing this morning CTT shares are down 16.79 per cent at $0.545.