Redbubble (ASX:RBL) share price sinks 13% following trading update

What’s driving Redbubble shares lower?

| More on:
Side-on view of a devastated male investor laying his head on his laptop keyboard following the release of PointsBet's quarterly update

Image source: Getty Images

The Redbubble Ltd (ASX: RBL) share price is having a horrific afternoon on Thursday following the company’s latest trading update.

At the time of writing, the e-commerce company’s shares are down a sizeable 13.16% to $3.96. In contrast, the All Ordinaries Index (ASX: XAO) is up 1.14% to 7,658 points.

How did Redbubble perform?

In today’s release, Redbubble announced the results for its first quarter of the 2022 financial year.

The company reported a disappointing set of numbers across key metrics, despite improving performance from July to September. On the back of the results, the Redbubble share price tanked as low as $3.82 during the first hour of morning trade.

For the period ending 30 September, total revenue fell by 28% to $126.7 million. This predominantly came from marketplace revenue which also dropped by 28% to $105.9 million. Excluding mask sales, Redbubble achieved a lift from negative 11% in July to negative 2% in September.

Gross profit sank by 34% to $42.4 million, despite efforts to continue delivering initiatives to drive growth. Key strategic themes included:

  • Launch of Afterpay for customers in the US, Canada, UK, and Australia;
  • 13 loyalty experiments completed with 7 showing early positive retention signals;
  • Introduced search and recommendation experiment to improve discoverability of new artists and works; and
  • 18 new products and line extensions brought to market such as dad hats, baseball caps, desk mats, mouse pads, and iPhone 13 cases.

Further dragging down the overall result, earnings before interest, tax, depreciation and, amortisation (EBITDA) plummeted 85% to $3.9 million.

At the end of the quarter, Redbubble declared a cash balance of $109 million.

While the company noted the performance was in line with expectations, shareholders didn’t take the result too kindly, pushing the Redbubble share price into negative territory.

What’s ahead for Redbubble?

Looking towards the remainder of the financial year, Redbubble is forecasting a slow and steady return to pre-COVID 19 levels.

As such, FY22 marketplace revenue is forecasted to be a tad higher than FY21, mainly weighted towards the backend.

Furthermore, targeted investments are expected to affect gross margin, marketing, and operating expense lines. EBITDA margin as a percentage of marketplace revenue is projected to be in the mid-single-digit range for FY22.

Redbubble remains confident the medium to longer-term opportunity will enable it to accelerate its presence online.

About the Redbubble share price

Over the past 12 months, the Redbubble share price has tumbled by about 17%. It is also down around 30% year to date.

Redbubble has a market capitalisation of roughly $1.09 billion and has almost 296 million shares outstanding.

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

Before you consider Redbubble, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Redbubble wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Aaron Teboneras 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.

More on Consumer Staples & Discretionary Shares