The Cettire Ltd (ASX: CTT) share price has shot higher after the luxury online retailer announced its FY23 first quarter numbers.
Cettire sells a large selection of personal luxury goods through its website. It sells around 400,000 products across clothing, shoes, bags and accessories from 2,500 luxury brands.
FY23 first quarter update
The business reported that its sales revenue – which includes returns from customers and allowances – grew by 2% to $66.1 million.
Gross revenue, which doesn’t account for returns, went up 62% to $84.4 million.
Pleasingly, it generated adjusted EBITDA (EBITDA explained) of $5.5 million, on a delivered margin of more than 20%. The ‘adjusted’ part means it excludes expenses associated with the initial public offering (IPO)
, share-based payments, unrealised foreign exchange movements and unrealised losses or gains on derivative contracts.
In other words, it did generate an operating profit, but it’s not reporting a net profit after tax (NPAT)
yet.
The number of active customers – people who have made a purchase in the last 12 months – increased 102% to 287,626. The gross revenue that came from a repeat customer was 56%, up from 48% in the first quarter of FY22.
Promising outlook
Cettire said that its market spending decreased to a low double-digit percentage of the sales revenue, which is promising for the profit margin if this doesn’t hurt longer-term growth.
The business had a net cash balance of $30 million at the end of the first quarter, putting it in a good position for investing in its future.
The Cettire founder and CEO Dean Mintz said:
The first quarter is traditionally a seasonal low point for the business. The strong profit result highlights the advantages of our proprietary software-driven automation and the uniqueness of our business model, benefiting from a highly flexible cost base, low overheads and minimal inventory exposure.
Further, our profitability and supportive working capital dynamics translated into positive quarterly cash flow.
Final thoughts on the Cettire share price
The Cettire share price has dropped 75% over the past year. Yet the business continues to grow revenue strongly and it’s seeing promising signs of profitability. It’s also unlocking growth with interesting partnerships.
How profitable can it become in a few years? It’s hard to say. I think the Cettire share price has been oversold, though I’m not sure how far the company’s business model can take it.
In five years, assuming it can keep growing, I think the Cettire share price could deliver quite a bit of growth. But, there are other retailers that I would prefer to buy more such as Temple & Webster Group Ltd (ASX: TPW), Wesfarmers Ltd (ASX: WES) and Premier Investments Limited (ASX: PMV).
