Why Bell Potter is bullish on this online luxury retailer

Market watchers may be surprised to find out Bell Potter has today ranked Cettire (ASX:CTT) a “Buy” with a 12 month target price of $2.40 reflecting a return of 41%. 

Only last year, the company was (for a while, at least) the biggest single-year loser on the Oz bourse.

Cettire hit an all-time high in the second year of COVID on 12 November 2021. Shares rose to $4.32. 

Seven months later, by 1 July 2022, they were worth $0.38. 

Founder Dean Mintz further caused strife in November when he sold $60m worth of shares without any real explanation. It’s unsurprising that the Australian Financial Review once described the man as “mysterious.” 

Return to profits

Cettire’s performance has turned around as evidenced in its latest 1H FY23 report, delivering $16.7m in earnings. 

The average order value from a Cettire customer is $800.

Bottom line profit for 1H FY23 sits at $8m, which effectively means Cettire has broken even on 2021. It posted an $8m loss in the last prior corresponding period. 

Overall revenue was $187.7m, up 65% compared to 1H FY22. Repeat customers generate 56% of gross revenue. 

Between October and December, sales revenue was up 55% based on the same period the year before with 314,000 active users. 

Sales between November and December in that same bracket were up 49% as Black Friday and Boxing Day took interest. 

Mintz has said there is "very strong demand" in the US, Australia and UK respectively, as luxury buyers rejuvenate an appetite for spending (discounting those who are too rich to feel cost of living impacts).

The US is Cettire’s strongest market. 

What is Bell Potter watching? 

Bell Potter analyst Chami Ratnapala has upwardly revised earnings forecasts for Cettire’s full FY23 results, based on higher than expected trading volumes spotted in the 1H FY23 report. 

Marketing expenses relative to sales revenue is also declining, and the company has been able to increase its margins to approximately 24%. 

The broker has highlighted key risks at Cettire, however. 

“CTT does not have exclusive arrangements with branded goods suppliers,“ Ratnapala wrote. 

“There is a risk that CTT may be unable to continue to source products from existing suppliers, and to source products from new suppliers in the future, at favourable prices.”

This issue has been a concern since 2021. Original investors in the company’s IPO noted that while Cettire sold luxury goods like Balenciaga, it had no actual contractual working relationships with any of these high-value brands. 

Spawning the language they would later use to describe company chief Dean Mintz, back in 2021 the AFR described Cettire as operating in a “cloud of mystery.” 

Cettire's charts since it listed in December 2020