Cettire's 1H25 results
Of de minimis importance
Consensus for Cettire’s tardily1 released 1H25 results calls for around 8% YoY gross and net sales growth, but an 11% fall in delivered margin and a 50% fall in EBITDA.
The implied Q2 numbers are therefore for a recovery from the ~17% delivered margin observed in 4Q24 and 1Q25 to over 20%, even despite the refund rate ticking back up over 23% from the abnormally low 21.8% in Q1.
As this is Cettire’s busiest quarter seasonally, with the usual dynamic of receiving cash upfront from customers whilst paying their suppliers on 6 week terms a cash build of ~$10m over the half and about $23-26m QoQ is expected.
It’s worth noting that if consensus is met, then this quarter would have a very similar outturn to Q2 of 2023 in terms of EBITDA, with similar refund rates - however this time it would have been done with nearly double the revenue, and over double the number of active customers - in a company that is being managed for profit now! Perhaps those duties revenues were material after all?
Does any of this matter?
We have two potential outcomes.
Either the results are even worse than this incredibly low bar and even despite the evident green shoots in the luxury sector as shown by the sector’s ~30% rally off the December lows, Cettire still can’t show they have a business model without skimming off duties and the stock loses all of the bulls bar Julian who will no doubt say it’s a 2027 story.
Or, given the company’s propensity for managing the business to show the market what it wants, perhaps it has managed to eke out something vaguely presentable - after all they’ve had an extra three weeks to come up with a story of some kind! With the increased short interest in the stock recently, perhaps they could even try to engineer yet another squeeze, despite none of them having stuck so far. Perhaps even some dark mutterings from Dean about the company being undervalued and wanting to spaff another $15m down the lavatory might get the gadflies excited as well!
Temporary reprieves are temporary
However if this was the strategy, perhaps the recently implemented then paused attempt to abolish de minimis treatment for Chinese-origin goods along side the 10% additional tariff might give pause. Whilst over a million packages entirely predictably piled up at JFK airport due to US Customs and Border Protection having had no warning and no systems to charge the duties due, the Executive Order undoing the previous Executive Order made it clear that this was only until such time as systems were developed to collect the duties.
Luckily for the current administration, the previous administration had already begun the process of implementing requirements for all packages using de minimis to file fulsome details of the package including not only an HS code, but also the “exact product description as listed in the advertisement for sale” (jumper or coat?), the purchaser’s name and address (to prevent split consignments), and the fair retail value in the country of shipment (not the First Sale For Export value that Cettire have illegally used to pass under the de minimis threshold). Pretty much everything CBP would need to automatically data match anything Cettire sent - and the regulations also provide for removing entitlement to the de minimis exemption entirely as a sanction if a marketplace was found to be abusing it.
De minimis provides a 20% pricing advantage
Cettire said that 7.5% of their sales into the US were of Chinese origin products. Taking a look at the pricing on Cettire’s US website from before the tariff to the period when these tariffs were expected to be paid, whilst 85% of products of non-Chinese origin had their prices cut around 3%, a similar proportion of Chinese origin products had their price increased by over 30%, but with curious spikes around the 12 and 19% areas:
This almost across the board 31% price hike doesn’t appear to be a sophisticated strategy to pass on the costs of the paying duties to the consumer based on the actual duties due, but instead a broad brush to recoup in the aggregate.
However it does give some very clear insight into the pricing advantage that Cettire has enjoyed by taking advantage of de minimis relative to domestic US retailers, since it wasn’t just the 10% tariff that was added to the selling price but another 20%, presumably to cover any other duties payable and ancillary costs.
However when we look at items priced over $800, we can see where the other common changes came from. Here Cettire appear to have somewhat bizarrely differentiated between sneaker and coats, with sneakers going up 19% whilst clothing went up 12% - surely if Cettire were already paying the correct duties on these goods there would have been no difference if the only change was a 10% hike in duties? very odd.
Anyway, that’s enough fun with pictures, since it’s already pretty clear how much of a pricing advantage Cettire gain from de minimis. Whilst this was a brief interlude for the 2nd most common country of origin for Cettire’s inventory, it was still only 7.5% of US sales. What about about the EU though?
Removal of de minimis for European goods ends Cettire
However goods of EU origin make up around 80% of Cettire’s inventory and presumably at least that amount in terms of US sales. Trump has already threatened swingeing tariffs on the EU, including already announced tariffs on steel and aluminium.
Any removal of de minimis would remove their most of Cettire’s pricing advantage - and since the only reason to shop at Cettire is price and Cettire’s pricing advantage is not uniform, it would eliminate large swathes of their sales before even beginning to take into account the disadvantage Cettire would be at to domestic US retailers by not being able to drawback duties on items that are returned whereas a US retailer with in country presence would simply return the item to stock.
So do the results matter? Well not really, since Cettire exists for only so long as the CBP and commerce department take to sort out their systems to eliminate de minimis, and with it - Cettire. Good riddance.
Apart from the first year of listing, Cettire have released H1 results in the first week of Feb
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