Online fashion retailer Cettire Ltd [ASX:CTT] is getting rinsed on the ASX boards today.
The small-cap is trading 21.36% lower at the time of writing. It’s enduring a massive sell-off as investors revolt against the company’s latest earnings.
So let’s take a closer look at the results, shall we?
Sales up, earnings down
It’s clear from today’s announcement that shareholders are looking for profit from Cettire, because despite some great sales growth, negative earnings have soured investor appetite.
As management reports: gross revenue is up 192% to $154.1 million for the first half of FY22. It’s a result that has been boosted by an equally impressive 181% increase in sales revenue to $113.7 million.
And despite posting a 43% increase in operating cash flow — up to $12.3 million — investors couldn’t overlook the hit to earnings.
EBITDA clocked in at negative $9.9 million. It’s a dramatic turnaround from the $4.8 million in positive earnings declared this time last year. On top of that, statutory profit was also sitting at a glum negative $8.3 million — another poor comparison to the $2.3 million profit in FY21.
All this while active customers, website visits, and total orders are making huge ground, increasing by 208%, 304%, and 221% respectively.
But, as we’ve discussed before, the market doesn’t seem to care all that much about Cettire’s growth metrics outside of the bottom line.
Despite all this, CEO Dean Mintz was doing his best to stay positive:
‘The financial results delivered over the first half of FY22 demonstrate the substantial progress we’ve made in executing our growth strategy. A number of important enhancements were implemented to our consumer proposition including further localisation, enabled by our proprietary e-commerce storefront solution, and investing in our brand.
‘What excites us is that Cettire has only just started and is in the early stages of its growth journey. The runway ahead is vast and we will continue to invest to capture the significant market opportunity we see for the business.’
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What’s next for Cettire?
Now, to be frank, we’re sure that not all of this sell-off is due to negative earnings. Some of it is most likely due to shareholders cashing out. But that appears to have compounded the issue.
We’d even go so far as to suggest that this stock may be oversold now…
However, while the growth rate is good, fashion is often a low-margin industry. In this sense, the actual sales and customer growth may all be for naught.
Nevertheless, the focus for Cettire has to be not only furthering their sales growth but also getting back to profitability. After all, if they can’t do that, all the sales growth in the world won’t matter if they never break even again.
If fashion doesn’t take your fancy though, why not try fintech? Because compared to the pummelling endured by Cettire, the fintech sector is renowned for embracing high-growth narratives.
We’ve even put together a list of three of our favourites in our latest fintech report. It’s a collection curated by our market experts: Ryan Dinse and Izaac Ronay.
To get your hands on the full report for free, click here now.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here
