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Why I’m adding Cettire (ASX:CTT) shares to my watchlist

I think it’s worth adding Cettire Ltd (ASX: CTT) shares to my watchlist. The ASX share seems to have a lot of growth potential.

To be clear, at this stage I’m not saying I’d buy it. But I’m going to keep an eye on it from now on.

What is Cettire?

It listed in December 2020, so it hasn’t been around for very long. The business itself was created in 2017.

Cettire is a global online retailer that sells a wide range of personal luxury goods through Cettire.com. It has a catalogue of over 1,300 luxury brands and over 160,000 products of shoes, bags and accessories.

Brands include Burberry, Dolce & Gabbana, Gucci, Jimmy Choo, Prada and Versace.

Cettire says that it currently ships within Australia, United States of America, Canada, Japan, New Zealand, Singapore, South Korea, Hong Kong, China, Indonesia, Philippines, Macau, Taiwan, Thailand, Saudi Arabia, United Arab Emirates, Qatar, Mexico, Argentina, Colombia, Peru and countries within the European Union. More than 90% of revenue is international.

Why I’ve added Cettire to my watchlist

I’m always on the lookout for interesting ASX share opportunities. E-commerce and businesses serving luxury goods or experiences are two trends that I think have a long-term growth runway.

A business that can do well within those categories could definitely be one to watch.

But there has to be more than just a theme, it needs to be generating good financial metrics.

Cettire’s FY21 half-year result, which it revealed a couple of months ago, seemed impressive. Sales revenue went up 479% to $40.5 million and active customers grew by 319% to 67,657.

One of the most pleasing metrics to me was that 34% of revenue was from repeat customers, up from 19% in the prior corresponding period. This came about from higher average spend per order and increased order frequency for this customer group.

A key goal of Cettire’s strategy is to grow the lifetime value of its customers, which will provide sustainable profitability as the business scales.

Another pleasing statistic was that despite website visits growing 300% to 5.8 million, the conversion rate improved from 0.83% to 1.15%. The average order value increased 3% to $776.

But it’s not just top line growth from Cettire. The business is demonstrating good margin growth. The product profit margin increased 517% to $15.4 million and adjusted EBITDA (EBITDA explained) went up 394% to $4.4 million, which excludes IPO costs. It generated a statutory profit of $2.3 million – up 354%.

The EBITDA growth was obviously powered by revenue growth, but Cettire is also investing heavily to marketing and its operational capabilities to fund future growth.

Cettire is investing in making its catalogue even more user friendly for customers and also investing in the mobile site functionality. It has also launched free returns for customers, which hopefully improves customer loyalty and encourages more purchases.

Summary thoughts

I’m not looking to buy Cettire shares yet, but I think it’s a very interesting business which is worth putting on the watchlist. It ticks a lot of boxes.

January 2021 revenue was up 478%. It could be worth investing in after we get more details in the FY21 result. It’s also looking to expand into ‘kids’, which can increase its potential growth.

There are also some other ASX growth shares that could be worth putting on your watchlist.

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