Why did the Cettire share price just crash 42%?

ASX investors are sending the Cettire share price spiralling lower today. But why?

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The Cettire Ltd (ASX: CTT) share price is under tremendous selling pressure today.

Shares in the All Ordinaries Index (ASX: XAO) retail stock closed on Friday trading at $2.24. In early morning trade on Monday, shares were swapping hands for just $1.29 apiece, down 42.4%.

The Cettire share price has since recovered a small part of those losses, trading for $1.34 at the time of writing, down 40.1%.

For some context, the All Ords is down 0.2% at this same time.

Here's what's happening.

Cettire share price plunges on profit warning

Investors are bidding down the Cettire share price after the online luxury goods retailer updated the market on its FY 2024 expectations.

On the plus side, Cettire noted that it had experienced "strong, broad-based revenue growth" in Q4 FY 2024.

And management said it expected to deliver "significant" year-on-year growth in active customers, sales revenue, adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) and cash.

Indeed, sales revenue is forecast to grow 77% to 99% from FY 2023 to $735 million–$745 million. And adjusted EBITDA is expected to fall in the range of $32 million to $35 million, up 24% to 36% year on year.

But the Cettire share price has nonetheless come under heavy pressure after the company reported that "the operating environment within global online luxury has become more challenging".

The All Ords retail share said softening demand trends and increased promotional activity had crimped margins and impacted its Q4 financial performance.

Commenting on the FY 2024 growth figures, Cettire CEO Dean Mintz said:

With FY24 nearing completion, we are expecting to report considerable growth in revenue and Adjusted EBITDA for the year. Not only does this highlight the strong traction that our platform is gaining both on the supply and demand side, but it also illustrates our efficient cost structure.

Turning to the more challenging market conditions sending the Cettire share price tumbling today, Mintz added:

A softening demand environment and an increase in promotional activity has been visible across our footprint, particularly in the last several weeks as the market has entered the Spring Summer 24 sale period.

Additionally, we believe the market is currently being impacted by clearance activity as certain players exit parts of the market.

To continue to expand our market share, Cettire has selectively participated in the promotional activity, leading to an increase in marketing costs relative to sales and a decline in delivered margin percentage.

Offering some potential future tailwinds, Cettire launched its direct platform in China on Sunday. The company is already processing orders.

"The company continues to grow rapidly, is profitable and cash generative," Mintz said.

Management will release Cettire's full-year FY 2024 results in the second half of August.

With today's big intraday losses factored in, the Cettire share price is down more than 50% over 12 months.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cettire. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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