Redbubble's cost-saving initiatives are proving to work with the company reporting profit growth for Q3, however revenue has dropped.
Redbubble has posted its Q3 FY23 results in a trading update. The group appears to be recovering from a turbulent 2022 and a disappointing first half with the company reporting a solid gross profit growth, however revenue has dropped 8 percent.
Redbubble has reported a Gross Profit After Paid Acquisition (GPAPA) margin of 22.9 percent, 770 basis points higher than last quarter and 140 basis points higher than the prior corresponding period, attributed to successfully adjusted price, promotional and paid marketing activities.
Marketplace Revenue (MPR) for the quarter is 8 percent lower than the pcp, which Redbubble says reflects a focus on maximising GPAPA and softer trading conditions in the US. YTD MPR is similarly down at 2 percent compared to the same period in FY22.
Martin Hosking, CEO and Managing Director of the Redbubble Group said, “The Group drove significant GPAPA margin improvement this quarter as a result of optimising its price, promotional and paid marketing activities across both the Redbubble and TeePublic marketplaces. The 3QFY23 GPAPA margin is 140 basis points above the Group’s 3QFY22 GPAPA margin and highlights that the Group’s unit economics remain compelling.
“Consumer demand has weakened since the beginning of the year and we expect market conditions to remain challenging in the short term. As a result, and to achieve our aim of returning to cash-flow positive by the end of the calendar year, we are looking for further opportunities for cost savings, while making targeted investments in initiatives, which have or will deliver a financial benefit in the near term.”
Hosking returned to the CEO position at the end of March. The co-founder stepped back into the role which he has sporadically held since 2010, as Michael Ilczynski departed the business last month.
Redbubble expects market conditions to remain challenging in the near term and has adjusted its FY23 MPR guidance for MPR to be slightly below FY22 MPR. FY23 GPAPA margin guidance has similarly narrowed to be between 18 percent and 20 percent. Having already started implementing the cost saving measures announced at the beginning of the year, the company is continuing to focus on driving GPAPA margin improvement to achieve its aim of being cash-flow positive by the end of the calendar year.
Also included in the trading update was the announcement that the company would be introducing account tiers on the Redbubble marketplace, including fees for some accounts. From May 1, Each artist account will be classified as either Redbubble Standard, Redbubble Premium, or Redbubble Pro, based on various criteria, including account activity, success as a seller, and whether an artist follows the community and content guidelines. Redbubble Standard accounts will be subject to a flat fee based on monthly earnings.
“Today, we announce a significant change to the Redbubble marketplace, the introduction of artists tiers and associated fees for some artists’ accounts,” said Hosking. “We believe the Redbubble marketplace is now at a scale where it makes sense to take this step, which is designed to encourage the uploading of additive content to the marketplace and recognize and reward artists who invest time creating unique products that their customers love. We are confident that this initiative, combined with the improvements we are making to search and discovery, will greatly enhance customers’ experience.”
The initiative is not expected to have a material impact on its FY23 financial results.
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