Glass half empty as Naked Wines suffers following sobering sales

NAKED Wines lost more than half of its value after it warned the cost of living crisis could dent demand following a boom in sales during lockdowns.

The online wine retailer said sales could fall by up to 4pc over the next financial year, while it expects to only break even on an underlying earnings basis.

Shares plunged by more than 50pc at one point yesterday to 142p, before recovering to 162p.

Naked Wines, which was founded by South African-born entrepreneur Rowan Gormley, was one of the major winners of the pandemic as lockeddown customers turned to its services for their wine purchases.

But the company has come under pressure as Covid restrictions eased and households feel the squeeze on living standards from surging inflation.

Nick Devlin, chief executive of Naked Wines, warned of “greater uncertainty” in the economy.

He said the ecommerce group’s main challenge was one of volatile consumer sentiment, which threatened its model of making heavy upfront investments to acquire subscribers.

Its customer retention rate dropped to 80pc in the 12 months to the end of March, down from 88pc the previous year.

Mr Devlin said there were “elements of how we have handled this where we could have done better”.

He added: “In particular, we might have been quicker to acknowledge that the combined inflationary pressures we saw were likely to endure, at least for the mid-term.”

Analysts at Liberum cut their price target on Naked Wines and warned that the retailer could face a “tough year”.

The cautious outlook overshadowed strong full-year figures for Naked Wines, which swung back to a profit.

The company recorded a pre-tax profit of £2.9m for the year to March 28 against a loss of £10.7m the previous year. Total sales also increased 5pc to £350.3m.

Mr Devlin said: “Looking ahead, Naked Wines is well positioned to continue to grow amidst a changing consumer environment.

“At the same time, we will not pursue growth at any cost, and our guidance is that we intend to trade the business at or around breakeven this year.”

Sales for the year ahead are expected to come in between £345m to £375m.

Naked Wines was bought by Majestic Wine in 2015, after which founder Rowan Gormley stepped away from the business and took the top job at Majestic.

In 2019 the high street retailer sold its stores and brand to US private equity firm Fortress and became an onlineonly company under the Naked Wines brand.