Naked Wines tanks on weak outlook
Naked Wines shares tumbled on Thursday after the company said it swung to a full-year profit thanks in part to a rise in repeat customer sales, but its outlook disappointed.
In the year to 28 March, the company swung to a statutory pre-tax profit of £2.9m from a loss of £10.7m the year before, with total group sales up 5% at constant currency to £350.3m. On a two-year basis, sales were 78% higher.
The company said sales were driven by "strong" retention and demand from existing members, with repeat customer sales up 13% to £315.1m. This was partially offset by an expected drop in new customer sales, compared to the "high-volume environment seen during the height of the pandemic in FY21".
As far as the outlook is concerned, Naked Wines said that given the current uncertain macroeconomic environment, it expects to be "on or around" breakeven when it comes to underlying earnings for FY23.
Total group sales are expected to be between £345m and £375m. At best, that would be an increase of 4% on the year at constant currency, and at worst it would be a 4% decline. Broker Peel Hunt said in a note that consensus expectations were for group sales of around £390m.
Meanwhile, investment in new customer acquisition is expected to be in the range of £30m to £40m. General and administrative costs are expected to be £45m to £48m and the group expects to invest £5m in marketing R&D.
Chief executive Nick Devlin said: "Looking ahead Naked Wines is well positioned to continue to grow amidst a changing consumer environment. Our enhanced scale, attractive unit economics and healthy balance sheet allow us to continue to invest for growth. 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.
"We believe this is the responsible balance to strike in FY23, mindful of the levels of macro-economic uncertainty but also of the opportunities we see ahead and the potential for disruptive models like ours to gain traction in tough times as consumers revaluate their purchasing choices."
At 1235 BST, the shares were down 42% at 166.30p.
Broker Liberum, which rates the stock at 'sell', slashed its price target to 150p from 280p after the results.
"There is a risk heading into a downturn that weak demand and potential angel cancellations combine to force the company to discount stock more in an attempt to turn the inventory into cash," it said. It added that the target price cut reflects the financial risk "which is now high in addition to the risks to forecasts".