Shares in Naked Wines (WINE:AIM) rallied 14.7% to 378.4p after the online wine retailer said it delivered results for the year ended 28 March 2022 in line with management’s expectations.
There was relief that full year sales remained in growth despite a fading pandemic tailwind.
The business benefited from strong demand from repeat customers, while Naked Wines also generated positive adjusted EBIT (earnings before interest and tax) in the low single digits versus a £1.5 million loss a year earlier.
A beneficiary of the inflection in consumer demand for online wine caused by Covid, Naked Wines’ share price fizzed to an all-time peak of 879p in July 2021 but have subsequently more than halved on fears it will struggle to recruit new customers at the same rate as during lockdowns.
PALATE-PLEASING RETENTION
In today’s brief year-end update, Naked Wines reported an encouraging 5% year-on-year rise in group sales, in line with expectations, with sales 77% ahead on a two year basis as repeat customers boosted performance.
The direct-to-consumer wine business also highlighted better than expected sales retention of 80%, with sales from repeat customers up 13% year-on-year.
‘We delivered full year results in-line with our expectations highlighted by strong execution, expense control and positive EBIT,’ said Naked Wines’ finance director Shawn Tabak.
‘Our balance sheet remains sound; after a year of building back our inventory levels globally, we ended our fiscal year with cash of approximately £40 million,’ added Tabak, who believes Naked Wines is ‘well positioned to take advantage of our long-term growth opportunity in the USA.’
CEO Nick Devlin insisted: ‘Our unique model offers a win for both winemakers and consumers and is backed by attractive and well-proven unit economics’ and was ‘especially pleased to see the improvements to our customer experience and product range reflected in sustained retention rates above our expectations.’
WHY LIBERUM IS CAUTIOUS ON ITS PROSPECTS
However, Liberum Capital highlighted the company’s reduced cash balance and ‘looming risks’.
The broker noted that the stronger than expected repeat sales retention of 80% flagged by the retailer implies ‘that new customer acquisition remained a struggle in the second half of 2022.’
