The Redbubble Ltd (ASX: RBL) share price is up 5% today after reporting its FY22 half-year result.
Redbubble is an e-commerce business that sells products online, such as clothes, phone cases, stationery and so on, that have designs printed on them that have been created by artists. The artists get a cut of the sale.
Redbubble’s tough FY22 first half
The e-commerce company told investors about a number of disappointing financial metrics:
- Gross transaction value down 14% to $381 million
- Marketplace revenue down 18% to $288 million
- Excluding mask sales, underlying marketplace revenue fell 5% to $283 million
- Gross profit dropped 25% to $108 million
- EBITDA declined 84% to $8 million
- Net loss of $1 million (down from a profit of $41 million)
- Operating cash inflow of $51 million, down 36%
What happened?
Redbubble had already told the market that its FY22 first half was likely to be negative because it was facing strong sales numbers in the first half of FY21, including strong mask sales. Compared to the first half of FY20, marketplace revenue was 60% higher.
There were a few positives, with North American apparel up 7% year on year. It also saw improving ‘repeat rates’ – it was 45% in the first half, up from 40% a year ago. The number of selling artists increased 21% year on year across the two marketplaces.
Redbubble also had to pay more marketing to get the sales it did. There was a lot more competition in the second quarter during the peak holiday period. This meant the profit margins were lower, on top of lower sales. There were also increased shipping costs. All of this was bad news for the Redbubble share price.
Growth plans
One tough half may not mean the end of Redbubble’s potential.
It is investing in a number of areas to grow revenue, improve scale, increase its competitive position and grow margins.
Redbubble will keep using its cash – it had $143 million on 31 December 2021 – for growth.
Outlook and my thoughts on the Redbubble share price
The ASX share said that FY22 marketplace revenue is now expected to be slightly below the FY21 underlying marketplace (which excludes mask sales). The FY22 EBITDA margin is expected to be negative low single digits.
Redbubble CEO Michael Ilczynski said:
I am confident of the tremendous potential for the Redbubble Group. To capture this, we will continue to invest in our technology platforms, artist and customer experiences, and our brands.
We have multiple growth levers and through our process of targeted experimentation and disciplined investment, we believe we can deliver sustainable above-system growth.
It’s still aiming for marketplace revenue of $1.25 billion in the “medium-term”. The EBITDA margin is also expected to expand significantly over the medium-term with marketplace revenue growth.
The deterioration of the situation and Redbubble share price has been disappointing.
I still believe that Redbubble has long-term potential, particularly from this lower price. But there’s no doubt that this is a disappointing decline compared to FY21. If FY23 is better than FY22 then some positive investor sentiment could return.
