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Naked Wines expanded fast during a pandemic year of buying wine online – but while sales grew, its losses widened

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More wine drinkers turned online for supplies in lockdown. Image: Shutterstock
More wine drinkers turned online for supplies in lockdown. Image: Shutterstock
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Naked Wines expanded fast during a pandemic year of buying wine online – but while sales grew, its losses widened

Naked Wines expanded quickly during its latest financial year as shoppers stayed at home and bought wine online in an “unprecedented channel shift” that the company says has transformed its market. The company spent £50m to grow customer numbers by more than half. Today it reports a 68% growth in sales – but widening pre-tax losses.

 

Naked Wines reported sales of £340.2m in the year to March 29. That’s 68% up on the previous year, when it turned over £202.9m. At the bottom line it made a pre-tax loss of £10.7m, almost double the previous year’s loss of £5.4m.

 

The retailer saw its sales grow strongly in the three markets it serves – especially the US, where sales grew by 78% to £161.7m. The US now accounts for 48% of sales and is Naked Wines largest market.

 

Sales growth came as the retailer grew its customer numbers by 53% to 886,000, following a £50m investment in new customers. That’s up by 113% on the previous year. Sales from repeat customers generated a profit of £84.9m - 83% up on the same time last year. But the extra spending on new customers results in a bottom line pre-tax loss. That said, Naked Wines says it still has £85.1m in cash available to continue investing new customers, as well as in wine stocks and in its strategic priorities.

 

Looking ahead, it plans to continue to focus on the US market, where it says there is a potential $20bn market, in order to continue sales growth.

 

The company now works with 235 winemakers in 19 countries, and over its latest financial year provided financial support for 36 through a $5m Covid relief fund. In its Australian market, it ran a A$5m ‘stop the squeeze’ campaign to support Australian growers and producers affected by trade disputes between Australia and China.

 

Naked Wines group chief executive Nick Devlin says: "Since inception, our mission at Naked has been simple – to disrupt the wine industry for the benefit of customers, our winemakers and our people. In FY21, we made significant progress towards this objective. It is clear to us that the pandemic has served to underscore the value of our business model in connecting winemakers and consumers directly and proven the opportunity before us.

 

Looking ahead to the current 2022 financial year, Naked Wines now expects sales to come in at between £355m to £375m, while investing between £40m and £50m in new customers. It also expects to make a profit from repeat customers of between £85m and £90m, with around 75% of new customers buying again.

 

He adds: “As we head into FY22, we are focussed on investing in the opportunity and executing against our strategic initiatives, which are i) to invest in new customers at attractive payback, ii) to enhance the customer proposition to improve LTV, iii) to leverage our scale to enhance value creation, and iv) to broaden and enhance our go-to-market strategy, driving growth."

 

Brexit

Naked Wines says the UK’s exit from the European Union new procedures now in force could cause issues for the business π but it has planned to mitigate those issues. “Delays at ports could limit our range, so we communicate regularly with freight forwarders and winemakers to make sure they can provide the required documents to ensure smooth passage at the border. In advance of the end of the Brexit transition period, we had hedged our foreign currency requirements ahead of our usual policy to bridge the transition period and avoid any potential exchange rate shocks.

 

“Looking ahead, there are potential legislation changes which could impact labelling. However, no changes will be required until September 2022 at the earliest, so we will work with winemakers to ensure they are registered correctly and able to comply with any changes.”

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