Redbubble faces a blowout in staff and investment costs, curtailing its growth aspirations

The online art marketer is an early contender for the most punished stock this reporting season after its shares slumped 40 per cent on the release of poor financial results.

Redbubble sells artists’ work online.

Online art marketplace Redbubble has unveiled a deep swing back into losses, a slump in its member base and ballooning costs that caused its share price to collapse 40 per cent.

With two weeks to go of the annual procession of financial results for 2022, Redbubble’s one-day share price dive could well give it the unofficial title as the most punished stock this reporting period, although investors are bracing for similarly poor results from other online retailers which have faced dwindling sales and cost blowouts.

On Wednesday Redbubble revealed it had slumped to a full-year net loss of $24.6m against a profit of $31.2m for 2021, as its revenue drawn from its online marketplace where artists can spruik their collections, sank 12.8 per cent to $482.6m.

The worsening financial losses for 2022 included a 7 per cent fall in active members to 14.4m from a year ago.

The losses accelerated towards the end of the financial year. The online retailer reported that in the fourth quarter its losses blew out to $10.7m from a loss of $8.7m in the fourth quarter of 2021.

In its outlook statement, Redbubble gave an early warning of extra costs for 2023 that would further eat into profits. It expected an increase in staff costs of $14m to $18m for the year and brand investment of around $8m to $12m.

Redbubble’s shares plummeted 40 per cent within a few hours of the earnings results being released and ended the day down 47c, or 31.44 per cent, at $1.025. The stock is down 71.5 per cent since the beginning of the year.

One of the items that has been sold through the Redbubble site.

Redbubble chief executive Michael Ilczynski put a positive spin on the results, saying the company had acted during 2022 to improve the experience for artists and customers while also investing heavily in the business.

This included raising its own prices; and in the fourth quarter the business implemented some proactive measures to support Redbubble’s unit economics and buffer rising costs of doing business. An average base price rise of about 6 per cent was implemented in early May 2022.

RBC Capital Markets has a “negative” sentiment on Redbubble. It said in a note to clients that although the retailer’s 2022 result was a modest beat, it was overshadowed by company guidance that operational expenditure was expected to grow by about 27 per cent in 2023 – and that the company declined to provide revenue guidance except to say that year-on-year growth was expected.

“In the medium term the company has pushed out its aspirational targets from calendar 2024 to fiscal 2026-2027 while providing little visibility in the interim,” RBC wrote.

Originally published as Redbubble faces a blowout in staff and investment costs, curtailing its growth aspirations