Cettire profit falls 34pc as expenses outpace sales growth

The group, which has been under siege from short sellers and saw its shares plummet in June amidst reports of softening conditions, reports adjusted EBITDA was up slightly for the year at $32.5 million.

Cettire's spending on marketing and advertising more than doubled to $75.7 million, while significant upticks were recorded for other expenses from administration to merchant fees to income tax.

In light of recent scrutiny, Cettire has also enlisted advisory firm Grant Thornton to undertake a more comprehensive audit under an expanded scope, including a technical review of the way the group recognises revenue.

Since the initial public offering (IPO) in late 2020 it has recognised its revenue as a principal, which commonly relates to a company controlling goods that are transferred to customers, but Grant Thornton is probing whether a status change to "agent" might be in order, defined as Cettire merely arranging the transfer of goods without control of them.

Cettire believes its current accounting treatment is appropriate, but notes that if its accounting policy were to change then only the company margin could be reported as revenue. As an example, in FY24 gross margin was up 62 per cent at $155 million.

"We note that although any adoption of such an alternate interpretation and policy would reduce revenue, it would not impact reported earnings nor cash flows nor represent a change in the legal basis for the group’s contractual relationships with suppliers and customers," the company states in an update to the market today.

"Additional disclosure would also be required regarding gross merchandise value to ensure consistency with historical presentation of financial statements."

Founder and CEO Dean Mintz says a relentless focus on strategic growth and operational excellence resulted in considerable year-on-year growth in active customers, up 64 per cent at approximately 692,000, as well as sales revenue, adjusted earnings and cash.

"We have continued to grow our share of the global online luxury goods market and are extremely pleased with our strengthened position at the end of FY24," says Mintz.

"Not only did approximately 270,000 net new customers purchase from the platform during the year, but existing customers, on average, purchased more and spent more per order, demonstrating the growing loyalty of our customer base.

"Today’s results highlight the strong traction our platform is gaining globally, while also demonstrating the benefits of our capital-light and cost-efficient business model, enabling us to grow the business while remaining profitable and self-funding."

Cettire's long-awaited mainland Chinese market entry took place towards the end of the financial year on 23 June, but was overshadowed by reports of softening demand more broadly and a subsequent drop in the CTT share price.

The company notes softer trading conditions have continued since the start of the current financial year, but for Cettire itself revenue has been tracking 20 per cent higher year-on-year over the course of July and August, and this has been achieved with lower marketing spend as a percentage of sales revenue.

"Our focus in the near term is to increase emphasis on profitability over growth, particularly while market conditions remain soft. Longer term, we see the strong fundamentals of the growing US$400 billion luxury market and its ongoing structural shift to online, providing Cettire with significant runway to scale the business," says Mintz.

"Cettire has flexibility to adjust operating settings to varying market conditions. Cettire’s ability to leverage its highly competitive business model has seen sales revenue organically grow 30 times in the past five years, while generating cash and profit in four of the last five years, with zero financial debt.

"This proven track record, along with Cettire’s large and diverse supply chain, global customer footprint and minimal inventory risk, provides great confidence in our ability to adjust quickly to varying market conditions and changes to localised demand."

CTT shares are down 12.26 per cent this morning at the time of publication at $1.167.