Shares in online luxury goods seller Cettire (ASX:CTT) fell sharply on Monday after the company surprised investors with a downgrade. Upon closer inspection, it was revealed that the company had been selling goods at little to no profit in the final months of 2023-24.

The shares more than halved, hitting a day's low of $1.15 from last Friday's close, before slightly recovering to be down 48% at $1.16 by 1 pm.

Cettire noted that it had experienced "strong, broad-based revenue growth" in the final quarter of 2023-24 but also admitted that "the operating environment within global online luxury has become more challenging."

(Monday saw Cettire, Star Entertainment, and Metcash use similar words to describe the current trading environment.)

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

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

And that was the problem. Sales revenue in the nine months to March was $545.2 million, according to an update issued in April, with adjusted EBITDA for the nine months put at $32.1 million.

Now, the adjusted EBITDA figure for the full financial year to June 30 is estimated at $32 to $35 million, meaning the company will have sold around $200 million worth of goods in the current quarter for little or no profit ($3 million at best).

No wonder the shares collapsed once investors worked out the math and matched it to the comments.

The company explained that weaker demand trends and increased promotional activity (advertising spending) had crimped margins and impacted its June quarter financial performance, leading investors to expect lower profits.

"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," CEO Dean Mintz said in the update.

"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."

However, he was still upbeat: "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."

Investors ignored the news that the company's direct platform in mainland China went live on Sunday and was "already processing orders," according to Mintz—an afterthought in the wake of the slump in earnings.