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STOCK WATCH: Cettire’s $5.5 million adjusted EBITDA. Are investors impressed?

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By Published On: October 11, 20220 Comments

Is it all smoke and mirrors, or is the Cettire 'business model' paying off? Cettire up 17.6% on the ASX this week, BikeExchange down 15%.

Cettire (ASX: CTT) has today provided an update on its trading performance for the quarter ended 30 September 2022 (Q1 F23). Adjusted EBITDA of $5.5 million was achieved on a delivered margin greater than 20%. It also announced sales revenue growth exceeding 70% on the prior corresponding period (PCP) as well as net cash of approximately $30 million.

CEO and Founder Dean Mintz said: ‘Cettire continues to demonstrate strong profess on its strategy to grow penetration of the large global luxury goods market. Our marketing initiatives and commercial offering are resonating with customers and we observed an acceleration in revenue and AOV growth into the quarter end, providing confidence in our Q2 outlook.’

Mintz also added that Cettire’s strong Q1 performance ‘highlights the advantages of our proprietary software-driven automation and uniqueness of our business model, benefiting from a highly flexible cost base, low overheads and minimal inventory exposure.’ If we took a shot every time Cettire referred to its proprietary software, we’d be drunk by now. But it seems to be paying off.

It’s interesting to flag ‘uniqueness’ as the factor contributing to accelerated growth when it was this business model that led to questions about future growth potential not that long ago. In fact, last year Power Retail broke news of a trading halt after Cettire shares plunged following publication of an article in the AFR that reported fund managers who bought into Cettire’s $65 million initial public offering were worried about the company’s ‘longer-term prospects’ due to…its business model.

In more recent times (particularly its FY22 annual report) there has been much emphasis placed on the company’s automatic and proprietary software. Investors recently seemed pleased with its growth, though perhaps delays to its launch to mainland China in partnership with JD.com tempered things slightly. There was much focus on the proprietary storefront software and the fact that Cettire now owns the technology across the end-to-end customer journey and, according to Mintz, a huge part of what will underpin the company’s future growth.

Cettire is the best performer on the ASX Listed E-Com Index, up 17.6% over seven days to $0.84. After its trading update, its share price has received a small boost ($0.85 at time of writing). That the company keeps placing emphasis on its ‘unique’ business model (that seems to be the same as every other luxury goods drop-shipper) and the power of its proprietary software seems to raise more questions than answers, actually. But for now, investors are happy.

Source: ASX Listed E-Commerce Index based on ASX reporting for the period

Booktopia has also had a strong few weeks on the ASX, up 8.3% over the last 14 days, and steady at +4% in the last week, closing at $0.26 on Monday. Nash’s withdrawal of the notice to convene an Extraordinary General meeting (following the resignation of the independent non-executive Directors) has buoyed the company’s performance.

Adore is also performing well, closing at $1.40 yesterday. It’s down 1.1% but has been holding steady for the last week and is actually up 10.2% over the last fortnight. By lunchtime on Tuesday it was up $0.06 to $0.46.

Kogan is also performing well, up 8.5% in the last seven days, to $3.18. It is however, a dip in the shorter term, from $3.32 at close on Friday. Unlike Adore, it’s trending downwards at the time of writing.

Redbubble is down just 2.3%, which doesn’t seem like a massive drop in the scheme of things. But closing at $0.65 on Monday is a stark difference from the $1.50 it recorded as recently as August 2022. So while Adore, Booktopia and Kogan are all up in the last 90 days (32.1%, 18.2% and 1.3% respectively), Redbubble is actually 38.6% down over three months. It’s reflective of the difference in trajectory and why the company’s more recent poor performance might be raising eyebrows.

Temple & Webster, also in contrast, is 7.7% up over the last week, to $5.33. Like Kogan, it’s actually a slight dip since close on Friday ($5.88) and (also like Kogan) has continued to trend downwards today ($5.14 at time of writing).

BikeExchange is the worst performer on the ASX Listed E-Com Index, down 15% over seven days to $0.017. Ouch.

The E-Com Index is up 6.7% over the last week, outperforming the ASX200 which is up 3.3% in the same period.

Figures are current as at close of ASX on 10 October 2022. This is analysis only and not intended as investment advice.

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About the Author: Natasha Scholl

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