CTT (ASX) Ann: Response to Media Article

Originally posted by Ackers09: ↑

Another piece from AFR suggesting it will be a slow burn at best in China. Looking forward to the next business update.

Cettire quietly enters China’s rocky luxury goods market - (source AFR)
Cettire, the fast-growing luxury goods marketplace, has quietly entered the Chinese market at the same time as competitors, including Richemont-owned Yoox Net-a-Porter, pull out to focus on more profitable regions.
Cettire historically has partnered with the Chinese e-commerce group JD.com, but flagged the launch of its platform in the country earlier this year. In April, Cettire chief executive Dean Mintz said the company would enter the market before June 30.
But it is doing so as others, including Richemont, which also owns luxury brands including Chloe and Cartier, say they will focus on “more profitable geographies” with Chinese shoppers spending less than expected on high-priced goods.
Cettire has been under considerable investor scrutiny amid questions,raised in an investigation published byThe Australian Financial Review, over duty payments and its interaction with customers. Its largest investors, including Phil King’s Regal Partners and Connecticut-based Cat Rock Capital, remain convinced of its success.
Those bullish on the company’s prospects say Cettire’s launch into China comes at a pivotal time when it can pick up market share; others suggest the rise of luxury Chinese brands – and a middle class under financial strain – will hurt trade.

Wei-Weng Chen, RBC Capital Markets’ head of small-cap research, said Cettire’s strategy was not guaranteed to be successful in China.“While the Chinese opportunity is clearly immense, investors must also recognise that China is the global leader in e-commerce,” he told the Financial Review.“There are no guarantees that what is currently working for Cettire will translate to China. It’s also worthwhile noting that while Google is presently a core pillar of Cettire’s demand generation, Google does not exist in mainland China.”
Cettire shares are almost 23 per cent lower than the start of the year. They fell another 1.1 per cent on Monday morning to trade at $2.26, giving the company a market capitalisation of around $860 million. They had traded as high as $4.86.
Luca Solca, a luxury goods analyst at Bernstein, said demand in China was subdued and spending remained below the 20 per cent growth before the COVID-19 pandemic.
“Traffic in Chinese luxury shopping malls is single-digit down YTD, while luxury sales are falling double-digit,” he said in a note to clients.
“Lower real estate prices have dissipated the consumer wealth effect and boosted people’s propensity to save, as they feel poorer. This in turn is hurting the economy, as many industries suffer a setback in end consumer demand. The job market is weakening as a consequence, making people feel even more under pressure and keener to save.”
Mr Solca said only a handful of small brands were growing, naming Miu Miu and Buccellati as bucking the trend, while Moncler – known for its down jackets which can cost north of $2000 – is also doing well.
“All other brands are more or less down in China. Gucci, Burberry and Ferragamo are still declining significantly,” he said. “Louis Vuitton and Dior are hanging in there, with solid commercial performance. Hermes, Cartier and VC&A appear solid.”
Cettire offers many of these brands including Dior, Moncler, Gucci and Burberry. The company holds no stock, sending directly to the consumer.

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But hang on, wasnt China market entry going to rocket the share price?

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(20min delay)
Last $1.42		Change 0.215(17.8%)		Mkt cap ! $541.3M

Open	High	Low	Value	Volume
$1.21	$1.42	$1.21	$6.411M	4.790M

Ann: Response to Media Article, page-141

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