👉 Background: Cettire is the Australian online luxury fashion retailer that started in 2017 and listed on the ASX in 2020. It’s known for its big discounts on high end luxury brands like Dolce & Gabbana, Saint Laurent, Valentino, Versace due to its grey-market.

👉 What happened: The Cettire plot has thickened after it warned investors that its earnings for the 2023-24 financial year are going to be around 20% below expectations.

👉 What else: This sent Cettire’s share price down by a massive 50%, wiping over $400 million off its market cap in just one day. And Cettire’s share price has dropped 75% in just the last 3 months. Given Cettire’s alleged controversial business practices, there’s probably more at play to explain this reaction.

What's the key learning?

💡When investors are sceptical about a company’s future, a small bump can have far reaching consequences.

💡A 20% earnings downgrade is bad news but not exactly lose-50%-of-your-value-in-a-day-level bad news. This result is also not so unsurprising given that fashion retailers across the country are struggling with sales.

💡However, Cettire’s been the subject of a fair bit of controversy recently.

• Its questionable treatment of import taxes
• Its US tax registration
• Its poor complaints handling

This is part of the reason why more than 6% of its shares have been shorted. And for investors that are already on the fence about Cettire, a poor earnings update is enough to get them to put their chips down.