Naked Wines shares soar despite widening losses

Naked Wines has assured investors it is moving towards “a period of sustained cash generation” after sales slumped and losses widened in the first half.

The online wine retailer saw total revenue fall 20 per cent year-on-year for the 26 weeks to October 2, to £132.3m, while pre-tax losses amounted to £200,000 last year.

In an effort to make up for the fall, the group boss told shareholders it had cut £3m in costs and plans to cut another £10m from its results.

The company also revealed that its general and administrative costs decreased 27 percent year over year.

As a result, Naked Wines expects to generate between £40 million and £50 million in cash in inventory over the next 18 months.

Rowan Gormley, chief executive of Naked Wines, said: “We are moving towards a period of sustained cash generation.

‘We have removed £3m of costs with £10m more to come and expect to generate £40-50m of cash from inventory over the next 18 months.

‘In addition, we have made good progress in testing an improved customer proposition that will allow us to return to growth. “I want to thank our people, our winemakers and our customers for their support and reiterate our determination to ensure they are rewarded for it.”

In November, Naked Wines cut its annual guidance and announced its chief executive would be leaving the business.

Chief executive Nick Devlin has agreed to step down “with immediate effect”, with founder and chairman Gormley taking on the role of chief executive on an interim basis until a successor is found.

The group’s share price has fallen more than 70 percent in the last year.

Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said: ‘Naked Wines has seen its shares rise, even though total revenue in the 26 weeks to October 2 fell 20% to £132.3m. , and losses have widened.

‘Possibly more worrying is the double-digit drop in repeat revenue, demonstrating that what should be loyal customers are declining. It’s a combination of belt-tightening and fierce competition in the online wine world.

‘The group has struggled post-pandemic following increases in demand seen during lockdowns, and issues such as attracting new customers and stock levels have caused problems.

“The group is suffering losses in both channels of the revenue funnel, with both existing and new customers proving fickle and elusive, making it an uphill battle. Cost reduction is helping the bottom line, but it is not enough and cannot continue forever: sooner or later a significant increase in customer activity will be necessary. The positive share price increase is probably more of a sigh of relief that things weren’t worse.”

Naked Wine Stocks rose 8.72 per cent to 46.75p in Friday morning trading.