Naked Wines shares plummet 45%: Online retailer described as a ‘pandemic winner’ reveals weak sales growth and cost pressures
- Naked Wines revealed annual sales only increased by 3% to £350.3m last year
- Boss Nick Devlin declared that the firm would not ‘pursue growth at any cost’
- The firm’s subscriber base – known as ‘Active Angels’ – has soared to 964,000
Online retailer Naked Wines has seen its shares nosedive after the reopening of hospitality venues led to a slowdown in the group’s sales.
The Norwich-based company revealed total revenues increased by 3 per cent to £350.3million in the year to 28 March as the growth in repeat consumer purchases only just outpaced the fall in trade with new customers.
It added that sales could fall by up to 4 per cent at constant currency levels this year due to current economic uncertainty, continuing cost pressures across all markets, and flat revenues in its new customer segment.
Weak growth: Naked Wines revealed annual revenues only increased by 3 per cent as the rise in repeat consumer purchases only just outpaced the fall in trade with new customers
Chief executive Nick Devlin declared that the company would not ‘pursue growth at any cost’ and instead seek to trade at or around a breakeven level this financial year.
Following this announcement, Naked Wines shares tumbled 41.2 per cent to 168.9p by late Thursday afternoon, even though the firm also reported swinging back to a £2.9million pre-tax profit.
By comparison, it saw losses nearly double to £10.7million the previous year due to higher transport and logistics costs, and hiking advertising spending, particularly in Britain and the US, to attract more patrons.
Fulfilment, general, and administrative costs continued to rise last year, yet the business avoided a loss by lowering its advertising budget by £7.1million in response to the weaker payback from new customer cohorts.
The size of its subscriber base – known as ‘Active Angels’- has soared to 964,000 from 580,000 in 2020, while the volume of repeat customer purchases has jumped 81 per cent in that time.
Many signed up because Covid-19 restrictions meant pubs, bars and restaurants were temporarily closed, and socialising with people from other households was either outlawed or subject to severe limits.
The size of Naked Wines’s subscriber base – known as ‘Active Angels’- has soared to 964,000 from 580,000 in 2020, while the volume of repeat customer purchases has jumped by 81 per cent
This inevitably led to drinkers buying more of their favourite tipples online and has boosted the group’s total revenues by 73 per cent over the past two years.
AJ Bell investment director Russ Mould said Naked Wines was the ‘very definition of a pandemic winner,’ partly helped by its business model of connecting subscribers directly with independent winemakers.
But he added: ‘Whether that pull still remains now household budgets are squeezed, and people have the option of going out for a drink is open for debate.
‘If you have the money to spend, the thought of sharing a bottle of wine with friends in a bar, pub or restaurant, after a long period when that option was off the table, is undoubtedly attractive.
‘Tellingly, Naked Wines is expecting to spend a considerable sum on customer acquisition in the current financial year and expects to be breakeven at best.
‘This is a far from ideal message at a time when investors are in no mood to wait for profit.’