Online marketplace Redbubble to make staff redundant as earnings slip

The online marketplace had ambitious plans for its business but a slowdown has forced it to rein in spending with large redundancies now planned.

Redbubble produces custom-designed t-shirts, mugs and other gifts, and provides a marketplace for artists.

Online marketplace Redbubble will make almost 50 staff – or 14 per cent of its workforce – ­redundant, as it reins in spending in response to competition for shoppers and flatlining revenue.

The decision to scrap its focus on growth was seen by analysts on Wednesday as a complete capitulation to the new realities of the tech sector and a general economic downturn.

In August Redbubble – which operates a website store that allows artists to sell original works – released its full-year results with the pledge of further investment in the business to grow its size, leading to a more than 30 per cent collapse in its share price.

In October in a trading update it again highlighted its strategy for growth even as other businesses were already cutting back on staff and restraining spending ahead of an economic slowdown.

On Wednesday its ambitious plans came to a halt with Redbubble conceding in an update that it expected flat revenue growth in this financial year and lower profitability as it faced “challenging” macroeconomic conditions.

Cost-cutting moves include slicing its marketplace workforce by 20 per cent, representing 14 per cent of the group’s workforce; suspending investment in brand awareness projects; and reducing general costs to align with its new business priorities and scale.

“Looking ahead, we expect consumer demand to remain challenging in the near term. As a result, we have decided to reduce the cost base within the Redbubble marketplace to accelerate the group’s return to cash flow positive,” Redbubble chief executive Michael Ilczynski said. “These are hard decisions and I am sorry for the impact this will have on our people. The steps we are taking, however, will put our business on stronger footing and position us to capitalise on the tremendous potential of the group as the consumer landscape improves.”

Redbubble CEO Michael Ilczynski will cut staff levels by 14 per cent as tough trading conditions forces him to rein in spending.

The reduction of its costs will help the online marketplace return to being cashflow positive by the end of calendar year 2023, the company said in its statement.

Mr Ilczynski was not available for an interview on Wednesday.

Shares in Redbubble fell more than 11 per cent to 50.5c. The stock is down 77 per cent in the last 12 months and 93 per cent since its peak of just above $7 in early 2021.

The cost-reduction initiatives are expected to slash the company’s cost base by around $25m on an annual basis with a proportion of this realised during the second half of this financial year and the full benefit anticipated to from the beginning of 2024. This would see operating expenditure drop this financial year from an earlier expected $135m to $145m, to between $125m and $135m.

In terms of recent trading, the company said second quarter revenue from its marketplace had lifted 3 per cent in the second quarter, however it said its guidance had been revised for marketplace revenue be broadly in line with the previous financial year.

The online marketplace said first half 2023 revenue would be $289.3m. The update revealed the company was now expecting a first half operating earnings loss of $18m against earnings of $10.5m for the first half of 2022.

RBC Capital Markets analyst Wei-Weng Chen told clients in a note that the cost-reduction initiatives were “prudent” but “in contrast to the prior stated strategy”.