Cettire share price continues to be very volatile, as it has...

Cettire share price continues to be very volatile, as it has been the case since listing.

Free cash flow yield looks high based on FY 24 results as the company had a free cash flow of 48.7 m$.
It corresponds to a free cash flow yield of 8.9 %.
However, it is probably more cautious to correct it from several elements :
- a large part of the cash flow from operation (63 m$) comes from the working capital decrease (33.6 m$ impact) due to their negative working capital model and their strong growth (+ 78 % in FY 24).
To get a recurring level of cash flow, it is probably more cautious to look at the cash flow excluding the impact of working capital,
- the net cash in the balance sheet (79 m$) is also inflated by the level of the negative working capital (62 m$), so it is better to look at the net cash (excluding the effect of the negative working capital). I consider the net cash to be rather 17 m$.
Based on the elements above, I estimate the free cash flow 24 to be 15 m$ which corresponds to a free cash flow yield of 2.9 % (share price : 1.40 $).

This low level of free cash flow is due to the low EBITDA margin in FY 24 (4.4 %) to compare with an average of 5.8 % during the last 6 years and a record of 12 % reached in FY 20 and FY 21.

Of course, the company is impacted in the short term by the weakness of the luxury market and the high level of promotion.

However, the main story for me remains the changes of the luxury wholesale market.
Cettire's business model exists because a lot of wholesalers try to get rid of some of their inventory via luxury market places like Cettire.

We know that the luxury brands do not like it, but so far, they can't do much about it, except trying to take more and more control of their distribution.
In fact, it's what luxury brands have been doing regularly (cf slide 14 of Cettire FY 24 presentation), as the share of wholesale is regularly decreasing from 68 % in 2013 to 48 % in 2023.
However, the total wholesale market is not decreasing, due to growth of the luxury market in the medium term.
Total wholesale market was 193 bn$ in 2023 vs 180 bn$ in 2018.

Interesting comments from Bain and Co in a study at the beginning of 2024 (Long Live Luxury) :

"Brands continued to exert more control over their distribution, with directly operated channels increasing in importance again. For the first time ever, the retail channel’s share surpassed the wholesale channel, at 52% and 48%, respectively".

"The online channel growth decelerated compared with previous years, as consumers favored physical interactions after years of restriction, resulting in a slight erosion of the channel’s market share, down to about 20%. Within that channel, the growth of monobrand websites normalized; e-tailers pushed on markdowns".