Redbubble shares tank after posting $24.6m net loss

Shares in online marketplace Redbubble (ASX: RBL) dropped 40 per cent this afternoon after the business reported a net loss of $24.6 million for FY22, a significant fall from last year’s overall profit of $31.2 million.

The results, released a month after Redbubble was ordered to pay Hells Angels Motorcycle Club  $78,000 for selling items depicting the club’s logo without consent, were materially impacted by a drop in the sales of masks from $55 million in FY21 to $10 million in FY22.

With marketplace revenue slumping by $70.7 million and EBITDA sinking from a profit of $52.7 million in FY21 to a loss of $11.2 million, some solace could be taken from an upsurge in performance during the fourth quarter.

“It is clear that there has been a cyclical shift in sentiment away from the broader technology sector, in part due to the reduction in the rapid growth experienced by the sector during the first two years of the pandemic. This change in sentiment has affected Redbubble also,” Redbubble chair Anne Ward says.

“This has not distracted the board or the management team from our roles, and we continue to actively investigate value-enhancing options on behalf of all stakeholders.

“Our priority for FY23 remains to invest organically, recognising that inorganic opportunities that could assist in the acceleration of shareholder value will also be considered.”

Redbubble CEO Michael Ilczynski echoed these sentiments.

“During the year, the macro environment in which our marketplaces operate was one of uncertainty and volatility exacerbated by supply chain disruptions, increased inflationary pressures impacting consumer spending and exogenous shocks such as the war in Ukraine," he says.

“Notwithstanding the operating environmental challenges, the group delivered financial results largely in line with expectations, demonstrating that the business has continued to operate at a much larger scale than pre-COVID-19.”

Founded in 2006, the Melbourne-based business runs a global marketplace powered by independent artists selling distinctive designs on high-quality, everyday products such as apparel, stationery, housewares, bags and wall art.

Redbubble invested significantly in strengthening its staff by bringing in more than 100 people during the year, boosting its internal capacity and capability. However, ongoing COIVD-19 impacts resulted in talent pools being constrained, and high competition for individuals increased overall wages from $14 million to $18 million.

The business increased the number of selling artists across its two marketplaces, Redbubble and TeePublic, to 809,000, up 19 per cent on FY21, as it also introduced a pets category – the first new category launched in six years.

The company retained a strong cash balance of $89 million at the end of June, with no debt. 

Redbubble reported 8.3 million unique customers amongst its 14.4 million active members during the year, with 46 per cent of marketplace revenue stemming from repeat purchases.

The vast majority of sales (69 per cent) come from North America, with Australia and New Zealand accounting for just 7 per cent.

With the benefit of one-off mask sales now fully cycled, Redbubble is expecting revenue growth in FY23 which will be helped by a minimum investment of $8 million to build brand awareness.

The board is looking to appoint an additional director with experience in scaling e-commerce marketplaces and brand building and expects the appointment to be made before the end of 2022.

Shares in Redbubble (ASX: RBL) slid 39.8 per cent to 90c at 2.00 pm AEST on the back of its FY22 results announced earlier today.