With wages up and profits falling, Redbubble's first quarter results have failed to impress investors, its share price hitting a new low.
Last Thursday, Redbubble (ASX:RBL) provided a trading update relating to the first quarter (1QFY23) and based on the market response, it’s fair to say investors were unimpressed. At close of ASX yesterday, shares reached a new two year low, hitting an eye-watering $0.46 and shedding 88.5% over 12 months. In the shorter term, it lost 29.2% over the last seven days, making it the worst performer on the ASX Listed E-Commerce Index.
So why did shares tank? The company reported a 5% decline in gross transaction value to $134.9 million and a 5% reduction in underlying marketplace revenue (MPR) to $102 million. Perhaps the biggest red flag was that gross profits fell 7% to $39.4 million and the company reported an EBITDA and EBIT loss of $14.6 million and $17 million respectively.
Furthermore, at a time when most companies are streamlining, Redbubble reported an increase in salaries and wages by $4.7 million. It seems an odd decision, especially in the current economic and ‘post’-covid environment. It has also increased costs via brand investment of $3.8 million without the sales growth to show for it (as well as a $4 million increase increase in other expenses). Despite this, it has plans to increase salaries and wages by $14 million to $18 million in FY23. It’s no wonder investors are off side.
Redbubble CEO, Michael Ilczynski said: “The MPR this quarter was down $5.1 million versus the pcp. This largely reflects the impact of cycling $4 million of mask sales within the Accessories category, and the encouraging and continued growth in the T-Shirts category of 12% or $7 million. The growth in T-Shirts was not sufficient to offset the decline in the Artwork and Homeware categories. The MPR result was impacted by slightly lower sales in Australia, Europe and the UK than expected, particularly in September. Importantly, the Group’s largest market, North America, remained resilient in the first quarter of FY23.”
He also added that: “Gross profit for the quarter was…down $3 million or 7% on a floating basis from the prior corresponding quarter; Gross margin was 39.1%, down 90bps largely reflecting the margin impact of the free shipping trials….The increase in salaries and wages reflects our strategy to invest to drive revenue and margin growth, with 76% of new FTEs since July 2021 added to our growth focused areas of Product & Technology, Marketing, Commercial and Supply Chain & Logistics.”
It’s looking like its $0.46 was its low, with its share price starting to lift at time of writing….edging closer to $0.47 by midday on Tuesday.
Source: ASX Listed E-Commerce Index based on ASX performance for the period
In contrast to Redbubble, the Cettire share price has gone from strength to strength after its Q1 update. It’s up a massive 85.6% in the last 14 days alone, to $1.55. In the last week, it jumped 28.1%, making it the strongest performer on the ASX Listed E-Commerce Index. For the quarter ended 30 September 2022 (Q1 F23), Cettire announced adjusted EBITDA of $5.5 million and sales revenue growth exceeding 70% on the prior corresponding period (PCP).
Adore is also performing well, up 14.3% over the last 14 days to $1.60. Kogan is also up, its $3.25 marking 2.2% growth over 14 days. BikeExchange experienced 0% growth in that same period, closing at $0.017 on Monday.
Booktopia is down 15.4% in the last fortnight, to $0.22. Its share price has essentially been completely unchanged, at $0.24 for the week of 17 October. While it did drop (with a Notification of unquoted securities the only announcement unlikely to be the trigger) it is already on its way up again at the time of writing (at $0.23 at lunchtime on Tuesday).
Temple & Webster dropped below the $5 mark at close of ASX on Friday, but has made a recovery, up to $5.14 on Monday. It’s holding steady (for now), but it’s not the $5.64 we saw earlier last week. It’s now down 3.6% over the last fourteen days.
In the last seven days, the ASX Listed E-Commerce Index is down 0.7%, underperforming compared to the ASX200 which is up 1.7% in the same period.
With AGMs on the horizon and further Q1 results to come, will we see Cettire-like reactions, or a Redbubble-like response from investors? Only time (and EBITDA) will tell.
Figures are current as at close of ASX on 24 October 2022. This is analysis only and not intended as investment advice.
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