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Redbubble share price rockets 40% on bumper Q4 sales growth

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The Redbubble Ltd (ASX: RBL) share price is flying today as investors react to a business update. At the time of writing, Redbubble shares have rocketed 40.13% to $2.20.

Redbubble is an owner and operator of two global online marketplaces, Redbubble.com and TeePublic.com, where independent artists can sell their designs on a range of products. This includes everything from apparel and bags to wall art and linen.

This morning, the company provided financial information from unaudited internal management reports on a ‘paid basis’. 

According to the release, this means delivery date adjustments will need to be made to the reports to align with accounting standards, which will ultimately reduce the amount of revenue recognised in the period due to timing differences.

The numbers

For the fourth quarter to 22 June, the company revealed year-over-year marketplace revenue growth of 107%, or 96% on a constant currency basis.

Year to date (again to 22 June), marketplace revenue has grown 42%, or 34% on a constant currency basis.

Redbubble also stated operating expenses for April and May were tracking 7.7% above the first two months of the third quarter (January and February).

This has translated to operating earnings before interest, tax, depreciation and amortisation profit of $11.9 million for the period 1 July 2019 to 31 May 2020. This represents year-over-year growth of 101%, or 86% on a constant currency basis.

Constant currency basis reflects underlying growth before the translation to Australian dollars for reporting purposes. This is relevant since Redbubble sources around 94% of its marketplace revenue in currencies other than Australian dollars. What’s more, TeePublic sources most of its marketplace revenue in US dollars.

Trading conditions

Redbubble advised it has benefited from an acceleration in online activity throughout the fourth quarter of FY20. 

The company has seen increased demand at both of its marketplaces, Redbubble and TeePublic, as well as across core geographies and product categories.

Importantly, the company noted its supply chain has managed the growth and orders are being fulfilled within expectations.

Organisational restructure

Redbubble also detailed an organisational restructure in its announcement this morning, which will involve reductions in headcount and related operating costs.

The reorganised teams will focus on a smaller set of core initiatives to propel profitable growth:

  • Artist acquisition, activation and retention;
  • User acquisition nd transaction optimisation; and
  • Audience understanding and loyalty.

Redbubble expects the reorganisation to generate annualised gross savings of $5.6 million in operating costs, with one-off costs of $2.1 million.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REDBUBBLE FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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