Naked Wines

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Naked Wines has slipped to a loss in the first half but pointed to an improvement in underlying profitability as it embarks on a new strategy to turn the group’s performance around.

The business unveiled new plans in October to reduce costs and improve profits and cash generation after struggling this year in the face of inflation, falling consumer confidence and a slowdown from pandemic-driven highs.

CEO Nick Devlin this morning called 2022 “one of the most difficult years in the history of Naked Wines” as ecommerce businesses came under significant pressure.

Revenues in the six month sto 26 September increased 4% to £165.8m, helped by weakness in the pound, with sales on a constant currency level down 3%.

Devlin said the ‘pivot to profit’ plan was already showing results, with a record adjusted EBIT of £4.6m in the half, an increase of almost four times over prior year levels.

Naked has plumped up margins in the US by rolling out pricing changes, kicked off a plan to reduce inventory levels over the next 18 months, restructured staffing levels and removed 32 roles, and reduced marketing costs by 44% year on year.

Despite the big cut to marketing, Naked reported only a 8% drop in new customer sales in the half.

However, Naked fell to a pre-tax loss of £215k in the period, compared with a £1.3m profit a year ago, after taking a £7.9m hit from writing down the value of its inventory and other finance costs.

Devlin said: “In the half we took the first steps to reduce our costs and drive improvements to our liquidity, profitability and unit economics in the near-term. Ultimately, we are laying the foundation for a return to our ambition of sustained, profitable growth, whilst also providing ourselves with greater resilience.”

He added the sales trajectory would reduce in the short term as expected, with full-year revenue guidance of £340m to £360m.

“However, the strength of our business model is clearly visible through underlying retention rates that remain unchanged to pre-pandemic levels, our success in realising price uplifts and improving payback levels. We are at the peak in our inventory cycle and, with our destocking plan, we expect to generate cash in FY24 whilst protecting our winemakers as well as our Angel members.

“Currently, we are trading profitably in line with our expectations over the key holiday quarter and reconfirm our revised guidance for FY23 shared in October.”

Shares in the company opened more than 2% higher this morning but have since fallen back to remain up by 0.8% to 98.1p. The stock is down 84% in the year to date.

Morning update

Separately, Naked announced it had appointed James Crawford as group CFO and executive director.

Crawford has been serving as interim CFO, in addition to his role as managing director of Naked Wines UK, since July 2022.

He has been with Naked for almost 9 years, holding finance, managerial and strategic roles. Prior to that, he spent 14 years at Diageo in various finance and business development roles.

Naked said it was “actively recruiting” candidates to fill the UK MD role.

Chairman David Stead said: “I am thrilled to welcome James back to the board and cannot imagine a better-equipped CFO to lead Naked through its next phase. James’ finance expertise and intricate knowledge of Naked’s business will be invaluable as we continue to evolve and grow.”

The FTSE 100 is flat this morning at 7,521.90pts.

Early risers alongside Naked are Haleon, which is up 5.6% to 311.9p after a the lawsuits over the Zantac drug were thrown out, Marston’s, up 3.6% to 39.6p, Ocado, up 2.6% to 679.4p, and McBride, up 2.3% to 21.5p.

Amomg the fallers are PZ Cussons, down 1.2% to 209.6p, and WH Smith, down 1% to 1,450.5p.

Yesterday in the City

The FTSE 100 slipped 0.4% to 7,537.58pts yesterday.

Food-to-go operator SSP Group rose 3.2% to 223.3p after it bounced back from the pandemic slump. The Upper Crust owner returned to the black and sales rebounded by more than 160% in the year to 30 September.

Other risers included Science in Sport, up 6.9% to 14.4p, Bakkavor, up 4.1% to 94.5p, McBride, up 3.8% to 21.3p, and DS Smith, up 1.2% to 308.9p.

Fallers for the day included THG and Fever-Tree Drinks, down 4.5% to 60.6p and 3.4% to 1,104p respectively.