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Redbubble posts first operating profit

Redbubble’s share price jumped nearly a third on Tuesday, after the ASX-listed online retailer reported its unaudited FY19 results, including an operating profit of $3.8 million in FY19, up from a $3.8 million loss in FY18.

The company, which sells thousands of unique art and designs that customers can have printed on a wide range of products, lifted revenue 41 per cent year on year (34 per cent on a constant currency basis) to $257 million.

Gross profit increased 48 per cent year on year (41 per cent on a constant currency basis) to $95 million, and gross profit margin was up 1.8 percentage points to 36.8 per cent.

Cash operating expenses, which exclude non-cash share-based payments, currency gains/losses and the $1.2 million one-off costs associated with its acquisition of TeePublic in October 2018, were up 25 per cent year on year (20 per cent on a constant currency basis) to $64 million.

Including marketing costs, expenses were up 34 per cent, still well below the growth in gross profit. This gave Redbubble an operating EBITDA profit of $3.8 million for the year, a $7.7 million improvement from its FY18 loss of $3.8 million.

The company attributed its strong result to strategic investments, which it said laid the groundwork for a return to healthy topline growth, management discipline to keep spending in check and the accelerating TeePublic business.

RedBubble acquired TeePublic, a US-based online retailer with a similar offering, at the end of last year, through a combination of new share placements and an institutional entitlement offer which raised a cumulative $52 million.

The company said it has leveraged its scale to achieve improved fulfilment costs for TeePublic and shared insights on pricing and promotions. It has also expanded TeePublic’s fulfilment to Europe, grown its paid marketing and built a core process for onboarding content partners.

The company said key initiatives are starting to pay off in the Redbubble business too.

After identifying its best-selling artists and helping them to increase their output, Redbubble said product revenue from these “authentic sellers” grew 39 per cent in FY19 and now represents 76 per cent of total product revenue.

Sales through Redbubble’s mobile app increased 140 per cent year on year in FY19, and in Q4, m-commerce made up 8 per cent of the retailer’s total sales.

At the same time, the company reduced its fulfilment and marketing costs, which helped it to rein in the rise in operating expenses to just 12 per cent in FY19, thanks to management spending discipline.

The e-commerce company, which has targeted websites for the US, Germany, France and Spain, in addition to Australia, said it will no longer provide specific short-term financial guidance.

Instead, it is focused on reaching its goal of $1 billion in sales, which it said can do profitably under current economic conditions.

The online retailer’s share price was $1.31 at the time of this writing.

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