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Naked Wines has cut growth expectations and pledged to cut costs and staffing levels to prioritise the bottom line after admitting it has “made mistakes” in the pursuit of rapid growth.

Announcing the result of its strategic review this morning, Naked said it has “reshaped our plans to deliver profitability at a sustainable level”.

In what it called a “pivot to profit” it has reduced growth targets from £345m-£375m in 2023 to £340m-£360m – now representing a sales drop of between 9% and 4% - while adjusted EBIT will move from break even to £9m-£13m.

This will be achieved by reducing marketing investment that was not delivering satisfactory returns and the restructure of staffing levels to create a “leaner and more focused organisation”.

The group has also renegotiated its banking facilities, resulting in £64m of available liquidity based on cash on hand and available borrowing contingent on the terms of the facility.

The previous covenant, based on ‘repeat customer contribution’, has not been delivered. A replacement covenant has been set at a level where we have considerable headroom and is linked to adjusted EBITDA.

Meanwhile, Darryl Rawlings will step down as chairman of the board, effective today and as a member of the board at months’ end

David Stead will assume the role of chairman of the board, effective from today.

CEO Nick Devlin commented: “We recognise that in pursuit of rapid growth we have made mistakes. Whilst the business today remains materially bigger than pre-pandemic, in 2021 we bought inventory and added to our cost base in anticipation of sustained faster growth which has not been delivered; today we are taking steps to reset our cost base and unwind inventory levels.

“We commit to not only resolve these challenges but also to ensure they are not repeated. While the operating environment remains challenging, with low consumer confidence and high levels of supply chain inflation, we have taken steps to reconfigure Naked appropriately.

“These steps will lay the foundation for a return to our ambition of sustained, profitable growth, whilst also providing us with greater resilience against macroeconomic challenges. We look forward to sharing more detail of the progress we have made with our interim results in December.

“This change in direction has been hard, but it has been necessary. We are committed to driving Naked forward and to deliver for all of our stakeholders - customers, winemakers, people and shareholders.”

Updating on current performance, Naked said that as a result of the actions taken as part of the strategic review, it is now trading profitably and in line with our revised guidance for 2023.

Due to the reduction in new customer investment, the group expects to report revenue declining by 3% in the first half (at constant exchange rates) with FX changes bringing this to up 4% on a reported basis.

In the second quarter group revenues were up 4% (at constant exchange rates) and up 14% on a reported basis.

Adjusted EBIT is expected to be significantly ahead of the prior year at £4m. However statutory profit before tax will be impacted by one-time costs of up to £12m relating to restructuring, inventory provisioning and stock commitment changes, offset by a profit of £4.8m on disposal of the freehold of the property retained on the sale of Majestic in 2019.

Naked’s shares have rebounded 25% this morning on the news.

Morning update

French spirits player Pernod Ricard has made a “dynamic” start to the year with strong sales growth based on increased pricing and sales volumes.

Sales for the first quarter of its 2023 financial year totalled €3.3bn, with an organic growth of 11%.

It said it saw strong broad-based performance across markets, with travel retail rebounding, strong growth in China and India and the US enjoying strong distribution.

It also saw continued “strong dynamism” in Europe, enhanced by an excellent tourist season supporting on-trade growth.

Growth was boosted by strong pricing due to the effects of 2022 price increases along with new increases implemented, notably in USA, taking price growth to 7%.

Organic volume growth was 11% with sales volumes up across its three regions.

By category, strategic international brands were up 12%, with growth mainly by Scotch, Jameson, Absolut, Beefeater and Martell.

Strategic local brands were up 13%, speciality brands up 16%, while strategic wines fell 8% after a soft start in the US and UK.

Chairman and CEO Alexandre Ricard commented: “I am hugely encouraged by our start to the year. Our performance continues to be broad-based with growth across many markets and diversified across our portfolio with all our spirit segments in double digit growth.

“Within a context which remains challenging and volatile, as for every business, we continue to actively invest to support our unique competitive advantages and fuel our future growth.

“We have been very active in portfolio management in the past quarter with Sovereign Brands, Código 1530 and Nocheluna and are excited to work with our new partners to fully develop the global potential of such highly attractive brands.

“We expect this dynamic growth to continue through FY23, demonstrating the strength of our strategy and the dedication and full engagement of our teams around the world”.

Ocado Group has announced that Julia M Brown has been appointed as an Independent non-executive Director with effect from 1 January 2023.

Brown served as the chief procurement officer of Mars Wrigley until 2021, and prior to this she held senior roles at Carnival Corporation, Mondelēz International and Kraft Foods.

She brings a wealth of experience in strategic procurement across diverse consumer products and significant leadership experience in global supply chain operations, the group said.

CEO Tim Steiner commented: “Julia’s breadth of business experience, and her deep understanding of the North American consumer in particular, will be hugely valuable to us as we progress through a period of rapid growth, successfully rolling out the Ocado Smart Platform, innovating at pace, and helping partners around the world take advantage of continued strong growth in e-commerce. I am very excited to welcome her to the board”.

Diageo has launched and priced a $2bn of corporate bonds yesterday.

The offering consists of $500m 5.2% fixed rate notes due 2025; $750m 5.3% fixed rate notes due 2027 and $750m 5.5% fixed rate notes due 2033.

Proceeds from this issuance will be used for general corporate purposes.

On the markets this morning, the FTSE 100 is down 0.1% to 6,916pts.

Along with Naked, risers include THG, up 3.6% to 60.6p, PayPoint, up 2.9% to 592.4p and Devro, up 2.8% to 174.8p.

Fallers include Science in Sport, down 3.2% to 15p, Deliveroo, down 3.2% to 78p and Just Eat, down 2.9% to 1,319.7p.

Yesterday in the City

The FTSE 100 closed yesterday down 0.2% to 6,925pts after four days of previous growth.

Fallers included Grencore, down 5.8% to 66.5p, Glanbia, down 4.7% to €11.80, Hilton Food Group, down 4.6% to 626p, FeverTree, down 4.3% to 928.5p, Pets at Home, down 3.9% to 280p and B&M European Value Retail, down 3.4% to 308.4p.

Risers included THG, recovering another 16.2% to 58.5p, Naked Wines, up 8.8% to 94.4p ahead of this morning’s update, Just Eat, up 2% to 1,358.8p, Hotel Chocolat, up 2% to 127.5p, Imperial Brands, up 1.5% to 2,026p and Nichols, up 0.9% to 1,100p.

Away from the UK, Nestle fell back 1.3% to CHF106.40 despite rising food prices helping it to increase organic sales in the first nine months of its financial year by 8.5%.