Another disappointing trading update, another share price plunge for Redbubble (ASX: RBL).
The company went through a couple of sell-offs in 2021 off the back of updates or results that were not convincing.
Tuesday saw the company start 2022 in similar fashion – a weak update and this time a share price plunge of 25% at one stage, and a 22.4% loss (to $2.32) by the end of the session (against a ‘more’ sedate 8% share price slide last September after an earlier weak update).
According to the update, the ecommerce company revealed its gross transaction value (GTV) was $381 million for the six months ended 31 December. This represents a 14% decline over the prior corresponding period.
It was a similar story for its marketplace revenue, which fell 18% to $288 million.
The company explained this was due to cycling strong sales growth in the prior corresponding period, driven particularly by mask sales.
Excluding mask sales, revenue would have been down 5% year on year.
But things continued to get worse in the update: Gross profit dropped 25% to $108 million, gross profit after paid acquisition (GPAPA) tumbled 36% to $63 million, and EBITDA crashed 84% to just $8 million.
Management advised that its margins were crunched by strong competition in the second quarter which impacted organic demand and led to increasing paid acquisition costs. This may not go down well with investors who have had concerns over Redbubble’s lack of customer loyalty for some time.
And then there was the less than confident outlook for the rest of the June 30 year.
In October, the company guided to full year marketplace revenue slightly above 20-2021’s levels. But this is no longer and has now been downgraded to “slightly below” what was achieved last year.
It has also downgraded its EBITDA expectations. Instead of an EBITDA to marketplace revenue margin in the mid-single digits, it now expects it to be “negative low single digits.”
The company ended the period with a very strong cash balance of $143 million which was portrayed as a positive. But in view of the long list of negatives, that’s hardly something to boast about.
