Redbubble (ASX:RBL) share price sinks despite 58% revenue increase

The e-commerce company enjoyed a solid year of growth in FY21…

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A woman bursts her bubblegum, indicating a sinking share price

The Redbubble Ltd (ASX: RBL) share price is sliding in early trade this morning after the e-commerce company reported its full-year earnings for FY21.

At the time of writing, the Redbubble share price has dropped 11.7% to $2.70.

Redbubble share price slumps after record result

  • Gross transaction value up 48% on the prior year to $701 milliion
  • Marketplace revenue increased to $553 million, up 58%
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $53 million, up 930% from FY20
  • Net profit after tax swung from a loss of $9 million in FY20 to a profit of $31 million
  • Unique customers climbed to 9.5 million, up 40% from prior year.

What happened in FY21 for Redbubble

The Redbubble share price will be in the spotlight today as investors take in the record result posted by the e-commerce company. Despite concerns earlier in the year, shoppers appear to have flocked to the marketplace that connects independent artists and consumers.

Shareholders can rejoice today after Redbubble posted substantial growth across its metrics for the FY21 full year. For starters, gross transaction value increased 48% to $701 million. This resulted in a record for marketplace revenue of $553 million, representing an increase of 58%.

In another relief for investors, the marketplace experienced sustained strong customer demand, despite traditional bricks and mortar retail reopening in the back half of the year. We will likely see the impact of this on the Redbubble share price today.

An inkling we covered earlier in the week of Redbubble being a potential beneficiary of mask-wearing again in 2021 appears true. Specifically, face masks contributed $57 million to marketplace revenue during FY21. Being a higher-margin product, sales of face masks also assisted in increasing gross profit margins. This translated to a 66% lift in gross profit to $223 million.

What did management say?

Commenting on the result, Redbubble CEO Michael Ilcznski said:

The Redbubble marketplaces are flywheel businesses, where improving one side creates positive, reinforcing impacts on the other sides of the marketplace. We have witnessed this powerful flywheel effect throughout FY21. I am proud of the record financial results and operational achievements that the team has delivered during that time.

On the company’s future efforts, Mr Ilczynski said:

We remain focused on the tremendous opportunity we have as a business, and on our medium term aspirations to grow GTV to more than $1.5 billion, to grow Artist Revenue to $250 million, and to produce Marketplace Revenue of $1.25 billion per annum.

What’s next for Redbubble?

Redbubble remains highly focused on its medium-term goals, which include driving top-line growth through customer acquisition. In quantifiable terms, this means a target of more than $1.5 billion in gross transaction value. Additionally, the company aspires to hit $1.25 billion in marketplace revenue and $250 million in artist revenue.

In chasing these goals, Redbubble will continue to make targeted investments in FY2022. These will include focusing on improvements in customer experience, both digital and physical.

Finally, the company warned that the first half of FY22 will likely see negative year-over-year growth in marketplace revenue. This is due to 1H FY22 being compared to a particularly strong cyclical period in the previous year.

Redbubble share price snapshot

The Redbubble share price has struggled over the past year. Following the company’s announcement of increased investments in the business, investors have sold off shares in the e-commerce platform.

During the past 12 months, shares in ASX-listed Redbubble dropped 7.3%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has surged 21.6%.

Should you invest $1,000 in Redbubble right now?

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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