With the advent of NFTs and social media, you’d think independent artists were having the time of their life, profiting off their work. However, Melbourne-based online marketplace Redbubble (ASX: RBL) is telling a different story as the Company reports revenue decline of 5% on a floating basis, and 8% on a constant currency basis. Such is the state of affairs that Redbubble expects salary and wages to be towards the lower end of its FY23 guidance range.

As per its report, profit is down 7% to $39.4 million, with the coming few months painting a grim picture for the Company and its artists.

Michael Ilczynski, CEO of Redbubble, commented, “The EBITDA loss of $14.6 million, which was down $18.5 million, largely reflects the impact of the investment in the Redbubble brand of $3.8 million, the investment in salaries and wages (up $4.7 million), and the increase in other expenses ($4.0 million), with this year on year change principally due to unrealised FX losses on foreign currency bank balances.”

Founded in 2006, Redbubble is an online marketplace allowing independent artists to sell their work. Artists upload designs, and customers choose the form in which they would like to own them. It’s a noble cause but has suffered lately. According to Ilczynski, its FY22 $5 million decline in the MPR 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. Most of Redbubble’s revenue is driven by t-shirts and apparel, with homeware contributing the least.

Still, the popularity of t-shirts wasn’t enough to balance out the decline in artwork and homeware. Moreover, the Company witnessed lowered 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.

Though artist revenue was down 2% on FY21 to over $20 million, it was still about 50% up from FY20. 

Ilczynski added, “As disclosed at our FY22 Results, the business implemented some proactive measures to support Redbubble’s unit economics, both in the short and long term. This included an average base price rise of ~6%, and free shipping over a threshold order value in the UK and in the US. Our experience in both these trials has been encouraging, across both members and non-members, with free shipping thresholds driving incremental MPR and gross profit versus the preceding period.” 

To cut costs, Redbubble deliberately slowed the rate of hiring during September in response to its dwindling revenue rate. Moreover, it expects salaries and wages to be at the lower end of the increase of between $14 million to $18 million for the year. The Company expects such measures to improve its FY23 results. 

Redbubble is hedging its bets on Gen-Z to help it pick its revenue back up. In FY23, the Company forecasts Redbubble’s brand investment portfolio to expand ~$8 million to $12 million (at constant currency) so that it could comfortably set on its path to achieve its medium term aspirations. Will Gen-Z come through?