Why did this ASX All Ordinaries share just crash 26%?

This All Ords share is having yet another day to forget…

| More on:
A man holds his head in his hands, despairing at the bad result he's reading on his computer.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Redbubble Ltd (ASX: RBL) share price is having another day to forget.

In morning trade, the e-commerce company's shares are down 26% to a two-year low of 53 cents.

This makes it the worst performer on the All Ordinaries Index (ASX: XAO) today.

It also means the Redbubble share price is now down 84% since the start of the year.

Why is the Redbubble share price crashing?

Investors have been heading to the exits in their droves this morning following the release of the company's first-quarter update.

For the three months ended 30 September, Redbubble reported a 5% decline in gross transaction value (GTV) to $134.9 million and a 5% reduction in underlying marketplace revenue (MPR) to $102 million. Both metrics were down 8% in constant currency despite the Australian dollar's significant weakness this year.

While that wasn't great, things got worse the further down the income statement you travelled.

For example, Redbubble's gross profit fell 7% to $39.4 million or 10% in constant currency terms.

Finally, the company's earnings before interest and tax (EBIT) turned negative during the quarter and went from a profit of $0.9 million to a whopping $17 million loss. That's despite its gross profit only falling $3 million year on year.

Bizarrely, at a time when most companies are cutting costs, Redbubble has increased its costs materially. It made a $3.8 million brand investment, which didn't even deliver sales growth, recorded a $4 million increase in other expenses, and increased its salaries and wages by $4.7 million.

The latter means that its salaries and wages totalled $19.3 million for the first quarter. Annualised, this equates to $77.2 million, which is the equivalent of half the company's market capitalisation!

But it won't stop there, it intends to increase its salaries and wages by $14 million to $18 million in FY 2023. This means at least another $9.3 million increase over the remainder of the year.

Management commentary

Redbubble's CEO Michael Ilczynski commented:

The MPR this quarter was down $5.1 million versus the pcp. This largely reflects the impact of cycling $4 million of mask sales within the Accessories category, and the encouraging and continued growth in the T-Shirts category of 12% or $7 million. The growth in T-Shirts was not sufficient to offset the decline in the Artwork and Homeware categories. The MPR result was impacted by slightly lower sales in Australia, Europe and the UK than expected, particularly in September. Importantly, the Group's largest market, North America, remained resilient in the first quarter of FY23.

Salaries and wages totaled $19.3 million for the first quarter. The increase in salaries and wages reflects our strategy to invest to drive revenue and margin growth, with 76% of new FTEs since July 2021 added to our growth focused areas of Product & Technology, Marketing, Commercial and Supply Chain & Logistics.

FY 2023 guidance

Redbubble's guidance for FY 2023 remains unchanged.

It continues to expect revenue growth and "compelling" unit economics, as represented by the GPAPA margin, supported by the 6% average base price rise from early May 2022.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended REDBUBBLE FPO. 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 Scott Phillips.

More on Technology Shares

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
AI Stocks

Why Macquarie forecasts a big rebound for these 2 quality ASX All Ords tech stocks

Macquarie expects a big rebound is coming for these AI linked, ASX All Ords tech stocks.

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

Is it too late to buy DroneShield shares?

This high-flying stock is up 90% since this time last month. Where next? Let's find out.

Read more »

A frustrated male investor frowns with his hands and arms open asking why the share price has dropped today.
Technology Shares

Why this high-flying ASX 200 tech stock just got downgraded

Let's see which stock has been hit with a downgrade today.

Read more »