The boss of Australian luxury platform Cettire, Dean Mintz, is expecting the global luxury market to hit US$622 billion (A$961 billion) by 2030, with this likely pushing the Cettire board to appoint two new directors at its AGM this week.
Speaking to shareholders, Mintz claimed that his business has a significant opportunity over the longer term.
“Demand for personal luxury goods globally has outpaced world GDP by a multiplier of 2 over the past 28 years,” Mintz said.
“This has seen the sector grow from approximately US$84 billion to over US$400 billion over the same duration. Notwithstanding a few short-lived periods of negative growth, it is clear that this sector is extremely resilient.
“The longer-term outlook for global personal luxury, despite current headwinds, remains very strong. By 2030, the overall market is expected to reach US$622bn, while the online segment is expected to represent over 30 per cent of sales.
“Millennials and Gen Z consumers are also becoming more relevant, forecast to represent approximately 78 per cent of luxury consumers by 2030.”
With all these projections, Mintz said Cettire has a significant opportunity over the long term, including further plans to scale into new markets, leveraging online penetration - which he expects to hit US$200 billion by 2030 - and plans to capitalise on market share with fewer competitors operating in the sector following market consolidation.
All this commentary comes despite growth pains for Cettire over the last year, with the luxury etailer reporting an 81 per cent lift in gross revenue to $978.3 million for FY24 alongside a net profit after tax fall of $5.5 million in the same timeframe to $10.5 million.
Cettire also recorded a fall in its profit margin by 3 percentage points for the first quarter of FY25 compared to the same time last year, despite another double-digit surge in sales revenue.
Amid these growth pains, the Cettire board has appointed two new directors to cope with the rate of scale recently. Earlier in the presentation, Cettire chair Kerry Bob East confirmed the board has secured Jon Gidney and Caroline Elliott as non-executive directors of the company, with both standing for election at the meeting.
Gidney has a long history in the banking and global capital markets sector, holding prior roles at Citi, J.P. Morgan and Macquarie Bank.
Elliott has 25 years of experience in non-executive director and c-suite roles across retail, financial technology and transport, including as chief operating officer of Kookai and Propel Group - the current owners of apparel retailer RB Sellars.
According to chairman East, the appointments followed a shaky second-half for Cettire, which led the board and management to conduct internal reviews and expand its FY24 audit.
“While these workstreams extended the completion of the audit beyond the release of Cettire’s full year results in August, the in-depth review was an important process,” East said. “The company’s independent auditor issued an unqualified opinion on the expanded audit on 24 September 2024.
“Notwithstanding the share price volatility and numerous distractions over the past six months, management is committed to enhancing stakeholder communications and delivering ongoing value to shareholders.”
Looking ahead, Mintz said the plan for Cettire is to focus on delivering margins and growth that is reflective of lower investment in marketing alongside a cautious approach to promotional activity.
Mintz added there are current factors challenging the luxury sector, which he anticipates will shift over the year, including a push towards profitability across the luxury sector, a rebalancing of supply and demand dynamics and a resurgence in creative direction.
“For those of you who follow luxury companies, you will have more recently observed weaker trading performances across the sector from both a growth and earnings perspective,” Mintz said. “The latest trading update from some of the world's largest luxury conglomerates reported material declines in sales growth. It’s clear that the luxury market is currently facing challenges.”
According to Mintz, the slowing of demand in luxury is cyclical, claiming that luxury is cycling a period of very strong growth post the pandemic. He also noted that middle income and aspirational customers are being priced out due to significant price increases across luxury fashion and leather goods over past several years
“Impacts of a generational wealth shift to more discerning millennials and Gen Z customers who are questioning value for money,” he added.
There is also slowing Chinese demand from Chinese nationals, Mintz reported, both abroad and at home “which, prior to this, had been the largest driver of growth in the sector over two decades.”
Mintz said these effects have contributed to an imbalance of supply and demand, with supply reportedly outpacing demand.
“Elevated inventory levels, combined with softening demand have translated to very aggressive promotional activity in recent periods as inventory holders have sought to generate cash and protect balance sheets,” Mintz continued. “Some of this behaviour has persisted into the Fall Winter season, however we have already observed changes in the wholesale buying patterns which should support improvements in the inventory dynamic.
“With a greater balance of supply and demand, we believe the pricing environment will improve in the coming months.
“We have also seen some consolidation within the online luxury space, with Matchesfashion exiting the market in July 2024 and a recently announced merger between Mytheresa and Yoox Net-A-Porter.
“While consolidation can contribute to short term market volatility, it is supportive of a more stable environment over the longer term.”