Cettire has reported an increase in fulfilment costs over FY24 due to an increase in the refund rate, adding downward pressure on the luxury platform’s gross margin percentage.
The Australian business reported a 2.1 per cent decrease in its gross margin percentage to 20.9 per cent. Along with a higher amount of refunds, this was also impacted by discounting activity.
The statutory gross margin increased in the year to $155 million, driven by growth in revenue, albeit at a lower margin percentage. Last year’s statutory gross margin was $95.6 million.
“The global personal luxury goods market softened during the year and Cettire observed this particularly in the 4th quarter of FY24, where the market was characterised by significant promotional activity and increased customer refunds,” the directors’ reported in the group’s recently released FY24 annual report.
“To maintain market share growth, the group invested through this period, in the form of promotional discounts and advertising spend.”
Advertising and marketing expenditure increased to $75.7 million, double the spend in 2023. This represented 10.2 per centof sales revenue.
“Achieving strong returns on our marketing investment activity continued to be a key focus for the business,” the directors’ report continued.
General and administrative expenses declined as a percentage of sales revenue to 3.0 per cent from 3.6 per cent in 2023, while income tax expense increased to $9.4 million from $6 million, “with a key driver being the impact of unrealised foreign exchange losses which are non‑deductible for tax purposes.”
Statutory net profit after tax was $10.5 million, down from $16 million in 2023.
The drop in margins and Cettire’s bottom line came despite the luxury platform reporting a 78 per cent lift in its annual sales to $742.3 million, driven by a combination of customer growth and sales revenue per active customer which increased to $1,072.
According to the directors’ report, FY24 growth was broad-based, with Cettire’s established markets experiencing growth in gross revenue of 70 per cent, down just 7 per cent reported in 2023.
Revenue in Cettire’s emerging markets increased 112 per cent on the prior corresponding period, down from 140 per cent in 2023.
The group’s active customers grew to 692,287, up 64 per cent on last year, with total orders processed hitting 1.19 million, up 69 per cent on last year.
Just under two-thirds (61 per cent) of gross revenue was generated by returning customers, and Cettire also reported continued penetration in existing and emerging markets, including the launch of a domestic China platform.
Cettire founder and CEO Dean Mintz said the overall performance was consistent across the first three quarters of the financial year, with the first half being the strongest half ever for Cettire.
“The final quarter of the year was impacted by factors including softening demand trends in the luxury sector and unprecedented clearance sales activity, in part impacted by the exit from the market of certain participants.
“During the year, Cettire invested to capture greater market share through participation in promotional activity and increased marketing.”
Mintz then acknowledged that Cettire’s share price has experienced “significant volatility”, particularly in the second half of FY24.
Cettire’s share price dropped by more than 50 per cent in early June, and fell to its lowest point of $1.05 on August 30. Today, the share price lifted by 47 per cent to $1.88.
In recent months, the luxury platform has been under media scrutiny over its duty payment processes and faced a grilling from the ASX over its reporting.
“While the potential reasons for this volatility are varied and in many instances, out of our control, I want to reassure shareholders that the management team is wholly committed to executing its strategy to drive increasing value for our shareholders,” Mintz said.
“On behalf of the Board and management team, I would like to thank shareholders who supported us during the year and continued to believe in the long term growth potential of Cettire.”