Virgin Wines has lowered its full-year sales and profit expectations amid “uncertain trading” and “numerous headwinds in relation to increased cost pressure”. Most of its customers now buy from it via online subscriptions, but the retailer says that it found it harder than expected to win new customers in the first half of its current financial year.
Staff absences as a result of the Omicron Covid-19 variant meant that the business had to stop taking orders for pre-Christmas delivery two days earlier than planned, costing it an estimated £800,000 in missed sales. The retailer says it has “largely been able to mitigate these pressures through highly efficient marketing, disciplined customer acquisition and strict control of costs”. But freight disruption and inflationary pressures also played their part and now Virgin Wines, a Top500 retailer in RXUK Top500 research, expects revenues and profits for the year to June 2022 to be slightly below current market estimates at a time of “uncertain trading”.
Overall, Virgin Wines says its first-half revenues stayed level with the previous year, and were 55% up on the same time two years ago. In the first half of its financial year, to December 31, total revenues came in at £40.5m from £26.3m two years earlier, the company said in an interim trading update today. Repeat sales in its core channels came in at £29.6m, up 6.2% on last year, and 59% on the year before that. Membership of its WineBank subscription business has risen by 11% on last time, and is 41% ahead of the same point in its 2020 financial year, with revenue from subscribers 28% up on last year.
Some 82% of sales were direct-to-consumer in the first half of its year, with subscriptions accounting for 79% of those direct sales. However, the retailer says it has found it harder to acquire new customers in the first half of this year.
Sales via commercial partners including Moonpig, Virgin Money, Avanti and LNER have all contributed to growth however, with sales in this part of the business 25% ahead of the same time last year.
Jay Wright, chief executive of Virgin Wines, says: ”As expected, the trading environment has evolved considerably over recent months, and given strong prior year comparatives, we have worked hard to maintain encouraging growth from our core sales channels, whilst maintaining strict discipline around our customer acquisition and our cost control. This performance continues to reflect the strength of our award-winning consumer propositions, the ongoing loyalty of our existing customers, the quality of our wines and our growing reputation for outstanding customer service. We are also pleased to report that the customers acquired during the Covid lockdown period continue to perform strongly.
“We were delighted to ship more than 7m bottles of wine during the period and to deliver sizeable growth in our customer base with strong levels of customer conversion and retention. Despite current headwinds we look forward to the future with optimism. We have a range of leading consumer propositions with more and more people experiencing the benefits of buying delicious, great value wine online through our subscription models. We also have strong growth in our commercial channel and a clear strategy for continued long term, profitable growth.”
At the end of the half-year, the retailer had a net cash balance of £13.6m.
In its last financial year, to June 30 2021, Virgin Wines revenues grew 30% to £76.3m, while pre-tax profits of £1.7m were down from £2.8m last time after one-off costs of £3.5m related to its stockmarket flotation. At the time the retailer said sales in the first quarter of its year were 13.3% up on the prior year, while new customer acquisitions were 10.7% ahead.