Analysts at the Royal Bank of Canada believe Cettire (ASX:CTT) is in for a “significantly more challenging” fourth quarter in FY25 compared to the third quarter.
This comes as the Australian-born global luxury e-tailer reported an earnings loss in Q3, with EBITDA down $4.7 million as a result of a $2.1 million foreign exchange loss due to volatility in the Euro to USD exchange rate.
In addition, Cettire reported that there is currently a soft luxury environment and elevated discounting contributing to the weak result.
Cettire also reported a deceleration in sales growth, with third quarter revenue growing just 0.8 per cent compared to recent double-digit lifts.
Looking ahead to Q4, Royal Bank of Canada analysts reveal three key reasons why they believe the luxury platform is in for a far tougher final quarter of FY25.
This includes the 145 per cent tariff by the US on Chinese products, which reportedly made up 4 per cent of gross sales, alongside a 10 per cent tariff by the US on European products, which made up 41 per cent of Cettire’s gross sales in the first half of FY25.
Meanwhile, DHL – one of the luxury platform’s key delivery providers – is reportedly pausing all B2C deliveries to the USA for packages over US$800. The e-tailer’s other providers are Fedex and Startrack Express, and they have yet to make any key changes to operations.
However, Fedex CEO Raj Subramania recently told investors four days ago that things are OK so far, “but I can’t tell you what happens next week.”
The RBC analysts also highlighted possible negative changes in aspirational luxury consumer sentiment due to viral social media posts purportedly offering direct access to luxury Chinese suppliers.
“Put together, despite CTT's near-term focus on profitability in 4Q, we would expect consensus estimates for EBITDA in 4Q to be likely flat or possibly negative,” RBC analysts wrote.
“With FY25 YTD EBITDA presently at $7.4 million, assuming CTT are breakeven in 4Q25, this would imply a circa 65 per cent downgrade to FY25 consensus EBITDA estimates (presently $21.2 million).”
Cettire also confirmed in a trading update last week that its marketing spend as a percentage of sales was down year-on-year in Q3. The e-tailer pulled back marketing spend to “above 8 per cent” in Q3 from “low double digits” in the same period last financial year.
“In our view, given softness in the broader luxury market and additional tariff headwinds, it may become increasingly difficult for CTT to reduce marketing expenses to aid EBITDA profitability while maintaining top line growth,” RBC analysts noted.
Cost initiatives are also expected to drive more than $5 million in annual savings. A series of cost initiatives implemented in the quarter across fulfillment, merchant fees and IT are expected to generate more than $5 million in annualised savings.
Cettire’s cash on hand was at $76 million at period end, down from $90 million in the same time last year, and down from $101 million in the second quarter of FY25.
“3Q25 saw a larger than typical cash unwind following CTT's seasonally stronger 2Q. This unwind was exacerbated by CTT's $4.7 million EBITDA loss.”
Cettire provided no guidance commentary for the fourth quarter, except to say its immediate focus is on delivering profitability.