Naked Wines slashes sales targets in spending overhaul

Naked Wines admitted on Thursday that "mistakes" had been made in its aggressive pursuit of growth, as it slashed full-year sales targets and launched a cost-cutting drive.

The online wine retailer has been investing heavily in both inventory and acquiring new customers to build on the surge in demand it had seen during the pandemic.

But on Thursday, the AIM-listed firm admitted that the rate of growth had failed to keep pace with the increased investment, and that it would now cut costs as it targeted a return to profitability.

It is cutting marketing spend and general and administrative costs by £18m, while investment in new customer acquisition is now forecast to be between £20m and £24m this year. The firm had previously forecast investment of between £30m and £40m.

Naked also restructured some teams to create a "leaner and more focused" organisation, telling Sky News it had cut 30 jobs, or around 6% of the workforce.

Interim revenues are now expected to be down 3% year-on-year because of the reduction in new customer investment, but adjusted earnings before interest and tax are likely to be "significantly" ahead, at around £4m.

Annual revenues are forecast to be between 9% and 4% lower year-on-year, at between £340m-£360m, down from previous guidance for between £345m and £375m.

Adjusted EBIT is expected to come in between £9m and £13m, from an earlier forecast for earnings before interest, tax, depreciation and amortisation to break even.

Nick Devlin, chief executive, said: "We recognise that in pursuit of rapid growth we have made mistakes. While 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 out cost base and unwind inventory levels."

As well as cutting costs, the firm said it had renegotiated its banking facilities and reduced further inventory commitments.

"This steps will lay the foundation for a return to our ambition of sustained, profitable growth while also providing us with greater resilience against macroeconomic challenges," Devlin added.

The board has also been shaken up, with current chair Darryl Rawlings stepping down with immediate effect and as a board member at the end of the month. He has been by David Stead, current chair of the audit committee.

Rawlings said: "As the company initiates its new plan, with a strong cost agenda, we believe that it is the right time to transition th role of chair. I remain an enthusiastic paying member and investor in Naked Wines, I wish everyone the best."

The improved earnings forecast and more cautious strategy was welcomed by investors, who have seen the shares slump 81% so far this year. By 0930 BST, the stock was up 26% at 118.9p.