Melbourne-born global marketplace Redbubble has recorded a gross profit after paid acquisition (GPAPA) margin of 28.5% in the fourth quarter of FY23, up 550 basis points above prior corresponding period (PCP).
This is also 350 basis points above the historical average, according to the company - which operates as an online marketplace where artists can upload their artwork to be printed on various products, such as clothing, and sold.
The move comes as the group reportedly reduced its cost of goods sold (COGS), introduced artist account categories and associated fees for some accounts and improved its paid marketing efficiency.
Despite the improved performance in the fourth quarter, the FY23 GPAPA margin was down 120 basis points on the PCP to 20.9%, due to softer performance in the first half.
The shifts in cost base comes as Redbubble co-founder and recently appointed CEO and MD Martin Hosking undertook an operational and financial review of the company.
“This process reinforced my view that the group consists of two well-established marketplaces, with strong unit economics,” Hosking said. “It also highlighted that the Group did not adjust quickly enough to an evolving operating environment in the post-pandemic world.
“We have learnt from these mistakes and taken decisive actions to rightsize our cost base and accelerate our return to positive underlying cash flow.
“It is significant that we are beginning the new financial year on stable footing, with neutral underlying cash flow achieved in July 2023.”
During the year, Hosking said his team’s priorities included rolling out a dynamic order routing system for the Redbubble marketplace in the United States, introduced account tiers on Redbubble and TeePublic marketplaces, and optimised its paid marketing spend.
As well as lifting GPAPA margin by 28.5% in the fourth quarter of FY23 on PCP, it also lifted GPAPA in general by 13% in the same period.
“We also implemented a number of cost-saving measures, which reduced our operating expenditure by approximately $45 million on an annualised basis,” Hosking confirmed.
“Throughout this process, we were careful to maintain sufficient resources to deliver our priority initiatives, achieve a return to growth and position the Group for long-term success.”
Looking ahead, the group expects trading conditions to remain soft in its key markets, particularly the US, in the near term. Redbubble also operates in Europe and Australia.
Due to this, the company noted it will focus on cost of goods sold (COGS), promotions and paid marketing activities to maximise GPAPA.
The group expects its FY24 GPAPA margin to be between 23% and 26%.
The group also expects to see the full benefit of cost-saving measures implemented in FY23 in FY24, with operating expenditure predicted to be between $92 million and $100 million in FY24.
“As we look ahead, we remain cautious and expect market conditions to remain challenging,” Hosking said. “As a result, we are focused on what we can control - ensuring we are operating as efficiently as possible and maintaining strong cost discipline.
“We continue to believe in the potential of our two marketplaces, Redbubble and TeePublic, and are confident that both businesses can deliver sustainable growth.”