Another less than inspiring market update on Wednesday saw Redbubble shares sold off for the umpteenth time in the past couple of years.
In August last year there was a 40% slump in the shares after another weak update which showed surging costs and weakening revenues.
It was, in fact, a year ago to the day on Wednesday (January 18) the shares slumped 20% on a weak update to a price of $2.39.
On Wednesday the shares sold down more than 11% to 50.5 cents which is a long way from the year high of $2.63 before the January 2022 update and the most recent highs around 66 cents in early December.
Redbubble is an online marketplace for independent designers and is – obviously – doing it tough, seeing little of the fairly liberal consumer spending suggested by the other recent retailer updates for the December half.
As a result, it is sacking 14% of its workforce as part of a cost-cutting program it hopes will return the company to cashflow positivity by the end of 2023.
“Trading conditions were increasingly challenging during the half year. Consumers were value driven in a tougher economic environment and as a result, competitive intensity in the market was high. To compete in this environment, the Group increased its promotional activities,” Redbubble said in the ASX statement.
That increased promotional spend and sluggish revenue growth saw operating EBITDA plunge from $10.5 million in the December, 2021 half year to a loss of $18 million in the December, 2022 half.
That saw cash on hand slump 32% to $97 million, from $134 million which explains why the cost cutting axe has been taken out and aimed at the company’s cost base.
CEO Michael Ilczynski said in Wednesday’s statement the company “delivered a solid revenue result for the half, with MPR (Market Place Revenue) in line with the previous corresponding period and underlying MPR up 2%.
“MPR momentum improved in the second quarter, with Group MPR growth of 3% driven by TeePublic, which continued to perform strongly, delivering double-digit MPR growth and its largest quarter ever, surpassing its previous high during the peak of the COVID-19 pandemic.
“In response to consumer behaviour and competitive intensity, the Group increased its promotional activities during the second quarter holiday period. This helped drive MPR growth, however it impacted the Group’s GPAPA (Gross Profit After Paid Acquisition) margin and therefore EBITDA.”
“Looking ahead, we expect consumer demand to remain challenging in the near term. As a result, we have decided to reduce the cost base within the Redbubble marketplace to accelerate the Group’s return to cash flow positive. These are hard decisions and I am sorry for the impact this will have on our people.
“The steps we are taking, however, will put our business on stronger footing and position us to capitalize on the tremendous potential of the Group as the consumer landscape improves,” he said.
