New US Trade Rules Will Squeeze Supplier Access And Margins

Key Takeaways

• Stricter regulations and supplier constraints threaten Cettire's market position, reduce access to in-demand inventory, and heighten operational and margin pressures.
  
• Heightened competition, shifting consumer preferences, and industry consolidation undermine differentiation, increase costs, and jeopardize sustainable, profitable long-term growth.
  
• Strong customer loyalty, rapid scalable growth in emerging markets, and ongoing tech investment position Cettire for sustained market expansion and competitive advantage in digital luxury retail.

Catalysts

Engages in the online luxury goods retailing business in Australia, the United States, and internationally.

• The introduction of stricter international e-commerce regulations such as the recent changes to the US de minimis rules and ongoing uncertainty regarding tariffs, taxes, and cross-border compliance are likely to erode Cettire's competitive advantage in its largest market, potentially causing sustained disruptions in sales growth and increased operational costs, leading to material pressure on future revenue and net margins.
  
• As luxury brands accelerate their direct-to-consumer strategies and clamp down on supply to third-party marketplaces, Cettire is at risk of losing access to high-demand inventory, weakening its supplier relationships and shrinking its assortment. This would diminish differentiation and could drive a structural decline in revenue, further compressing gross margins over time.
  
• Growing consumer emphasis on sustainability and ethical consumption may reduce the demand for fast-growing, cross-border, asset-light luxury platforms like Cettire, undercutting its long-term ability to expand its customer base and achieve the repeat revenue growth needed to justify aggressive forward earnings multiples.
  
• Margin pressures from an intensifying promotional environment, heavy discounting, and rising fulfillment costs due to FX volatility are unlikely to abate in the hyper-competitive online luxury segment, constraining Cettire's ability to expand operating profitability on a sustained basis and exposing earnings to continued downside volatility.
  
• Ongoing dominance and consolidation among large global luxury e-commerce platforms are likely to reduce Cettire's bargaining power with both suppliers and logistics partners, resulting in less favorable terms, elevated customer acquisition expenses, and persistent challenges in scaling its model profitably, putting long-term earnings growth at risk.

Cettire Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Cettire compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Cettire's revenue will grow by 8.8% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -0.4% today to 0.3% in 3 years time.
• The bearish analysts expect earnings to reach A$2.8 million (and earnings per share of A$0.01) by about September 2028, up from A$-2.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 34.6x on those 2028 earnings, up from -49.7x today. This future PE is greater than the current PE for the AU Specialty Retail industry at 26.7x.
• Analysts expect the number of shares outstanding to grow by 0.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Cettire Future Earnings Per Share Growth

Risks

• Cettire has demonstrated strong growth in emerging markets, particularly Asia and the Middle East, which now constitute over 37 percent of group revenue and grew 32 percent year-over-year. This geographic diversification could drive future revenue growth even if certain established markets soften.
  
• Active customers reached 657,000 with a notable 68 percent of sales coming from repeat customers, and average order value increased to $820, reflecting robust customer loyalty and higher spend per transaction, which supports revenue resilience and improved profit margins.
  
• The company's capital-light, asset-light business model and high automation enable rapid scalability across new markets with relatively low operating costs, helping enhance operating leverage and earnings as revenue increases.
  
• Continued investments in Cettire's proprietary technology platform support further personalization, efficient inventory management, and seamless online luxury experiences, positioning the business to capture long-term secular trend tailwinds in digital luxury e-commerce, expanding both market share and gross margins.
  
• Cettire ended the year with record levels of available inventory and deepened direct relationships with luxury brands and suppliers, strengthening its value proposition in the luxury goods supply chain, which could provide a sustainable competitive advantage and support gross revenue in the long term.

Valuation

• The assumed bearish price target for Cettire is A$0.2, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Cettire's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$1.18, and the most bearish reporting a price target of just A$0.2.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be A$955.4 million, earnings will come to A$2.8 million, and it would be trading on a PE ratio of 34.6x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of A$0.34, the bearish analyst price target of A$0.2 is 72.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.