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Why the Redbubble share price crashed 38% lower today

James Mickleboro
market crash

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

In morning trade the ecommerce company’s shares have crashed a massive 38% lower to $1.12.

Why is the Redbubble share price crashing lower?

Investors have been hitting the sell button in a panic this morning following the release of a trading update for the period from October 1 to December 9.

According to the update, Redbubble estimates that Group Marketplace Revenue for the second quarter to date is up 20% on the prior corresponding period.

Management advised that the TeePublic branded marketplace has performed strongly with quarter to date Marketplace Revenue growth of 59%. The Redbubble branded marketplace, however, has delivered quarter to date growth of just 2%.

This is below the company’s expectations and has been driven by increased price competition in Redbubble’s market leading sticker position. In addition to this, Redbubble’s apparel sales have not recovered to historical growth levels seen prior to October 2018.

FY 2020 expectations.

The release explains that the company is continuing to drive top line growth by focusing on accelerating near-term work. This includes marketing optimisation, product merchandising and line extensions, and growing member revenue.

In light of this, it is still expecting to grow operating EBITDA year on year and achieve positive free cash flows in FY 2020. But no firm guidance has been provided.

Redbubble’s CEO, Barry Newstead, said: ”While growth is slower than anticipated, the holiday trading season is still in progress and the core elements of the strategy are working. At the Group level, we will pull all levers to drive growth and deliver the best possible FY2020 result, setting up RB Group for long term success.”

Although management sounds confident on the future, it clearly hasn’t been enough to stop some investors from heading to the exits today.

The post Why the Redbubble share price crashed 38% lower today appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REDBUBBLE FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019