Criticism about the company pocketing some import duties that should have been paid to the government is a more complex issue that has resulted in some changes to the way it discloses such duties. But the company says that the amounts were insufficient to move the dial on the revenue line.
The founder selling red flag got larger this week when the share price halved after a market update revealed profit has essentially stalled in the final quarter of the current financial year.
It is Mintz’s three large stock selling events since the company listed in 2021 that is this company’s real red flag.
After the first nine months of the financial year, the company announced it had already earned $32 million. But in the fourth quarter, it was budgeting for earnings of zero to $3 million.
What is scary about this profit update is that if you annualise the fourth quarter, Cettire would earn between zero and $12 million if the conditions that have eaten its last quarter profit continued next year.
In March, Mintz pocketed $127 million after selling a 7.2 per cent share parcel at a time when the stock was trading at $4.83 – close to an all-time high. He received $4.63 for his stock and reduced his stake to 30 per cent.
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Sure, the company says that investment bankers made him do it because a stock’s liquidity is important. But it is hard to convince any investor (even a founder) to sell if they think the price is rising, so that reason always has shaky legs.
But the reason the shares crashed this week was because there is little margin for disappointment for growth stocks.
They become broker and investor darlings because they have a hockey stick earnings profile that can’t have a plateau kink.
To be fair, the Cettire business model has a lot of attractive features that other retailers don’t.
To begin with, there are no costly physical stores on which to pay leases and to staff. Another tick is that Cettire holds no inventory, rather it acts to match orders it receives with wholesalers or distributors.
Cettire currently has a market value of roughly $434 million.Credit: Dominic Lorrimer
And it has a skeleton staff – around 70 compared with online rivals that employ thousands. Plus, Cettire says it has superior software that seamlessly covers orders and fulfillment. But competitive advantage can easily evaporate when the market sours.
The soft demand for luxury goods being felt across the board has caught Cettire in its wake. Retailers including this former market darling are discounting – all of which is playing havoc with margins and profit.
Investors didn’t appear to factor in this possibility as they were dazzled by the company’s growth prospects.
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