Luxury online dropshipper Cettire sees 88pc sales growth, profit fails to keep pace

Luxury online dropshipper Cettire sees 88pc sales growth, profit fails to keep pace

Photo: Cettire, via Facebook.

Luxury online retail marketplace and dropshipping company Cettire (ASX: CTT) has reported an 88 per cent rise in sales revenue to reach $191 million in the March quarter, amidst a similar jump in active user numbers and confirmation of a China market entry by the end of June.

The number of active customer users was up 84 per cent at 644,026, implying an increase of almost 70,000 just since the end of 2023.

"This result reflects continued strength in Cettire’s quarterly performance, with ongoing momentum in sales revenue, active customer growth and conversion to profit. Cettire continues to rapidly drive market penetration across its global footprint," says founder and CEO Dean Mintz, who featured in the recent Australia's Top 100 Young Entrepreneurs list.

"Market conditions remain constructive and we have supplemented our strong customer proposition with marketing investment.

"Further, our increased focus on traffic quality has driven significant year-on-year improvement in conversion rate and an uplift in average order values."

Despite these positive results, shares are down 6.3 per cent at $3.14 at the time of publication, which may stem from earnings failing to grow at similar levels to revenue.

The company did not release a comparable March quarter update last year, but rather a four-year performance to 30 April with adjusted EBITDA at $7 million. On a pro forma basis, the adjusted EBITDA of $6 million is technically an improvement but is not in line with the staggering growth in other metrics.

This earnings estimate is also far behind the $26.1 million performance in the six months to the end of 2023, although the December half tends to be characterised by much higher sales in retail.

"Our business is execution focused. We continue to operate the business to maximise revenue growth, whilst also delivering profitability and cash generation. Whilst Q3 is traditionally a seasonal low point, we observed a strong improvement in year-on-year profit trends," Mintz says.

Cettire also responded to analysis from Substack account Taxloss last month which stated there were no disclosed Cettire entities registered in the US states of Texas or California for tax purposes. In today's announcement, Cettire reported it was registered for sales taxes in both jurisdictions and "is in good standing".

The group went further to emphasise its registration for sales taxes in the "vast majority of US states which have a sales tax regime" - locations that accounted for 99 per cent of US sales revenue in the March quarter. In the nine months to 31 March, Cettire claims to have collected approximately $18.7 million in US sales taxes, remitting $17.1 million with the difference reflected in its payables balance.

"Our US business continues to demonstrate excellent momentum, with year-on-year gross revenue growth accelerating in Q3 compared with the year-on-year growth rate achieved in H1 FY24," Mintz says.

"Since the implementation of the Company’s updated checkout on 19 March 2024, we have observed stable conversion rates in the US.

"The company has experienced continued strong growth in its available inventory, with the total database of unique products and seller stock value observing a noticeable step-up during the period."

He also highlights "significant progress" in Cettire's strategy to enter the mainland China market.

"We confirm that Cettire will launch in the China market during Q4 FY24. This represents an important strategic milestone for the company as we seek to further establish Cettire as a leading global luxury platform," he says.

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