Naked Wines’ share price rocketed on Thursday as it announced fresh restructuring and changes to its board.
The AIM-listed stock was last trading 28% higher on the day at 120.9p per share.
Online retailer Naked Wines said it was cutting jobs and reducing marketing expenditure due to “mistakes” in its growth strategy.
“Leaner and More Focused”
Naked Wines share price has sunk 82% over the past 12 months as the worsening economic landscape has hit sales.
In response it announced plans today to create “a leaner and more focused organisation.” It said it would cut marketing spending and general and administrative (G&A) expenses in order to save £18 million.
Naked Wines also plans to slash growth investment to between £22 million and £24 million in this financial year ending March 2023. This compares with the £41 million it spent in the previous period.
The business also announced its intention to wind down its inventories over the next 18 months. These destocking efforts, allied with its steps to reduce G&A costs, would result in a one-off cost of £12 million, it said.
The wine retailer added that it has “successfully renegotiated the profitability covenant on our credit facility.” This has given the firm £64 million worth of liquidity as of the end of the first fiscal half.
“We Have Made Mistakes”
Nick Devlin, chief executive of Naked Wines, commented that “we recognise that in pursuit of rapid growth we have made mistakes.”
He noted that “whilst 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 our cost base and unwind inventory levels,” Devlin added.
Revenues Forecasts Slashed
In other news Naked Wines slashed its sales forecasts for the year. It now expects revenues to fall between 4% and 9% year on year.
The retailer’s previous target was between sales growth of 4% and a decline of 4%. Today it commented that “the pivot to profitability will slow sales and increase stock holding.”
Naked Wines now expects to generate adjusted earnings before interest and tax (EBIT) of between £9 million and £13 million.
It had previously said it expects to break even on an adjusted earnings before tax, depreciation and amortisation (EBITDA) basis.
Half Year Results
During the six months to October sales at Naked Wines rose 4%,. However, on a constant currencies basis revenues shrunk by 3% year on year.
The firm said that “the first quarter accounted for the decline as the comparator period still had pandemic-driven buying in evidence.”
In the second quarter revenues at constant exchange rates rose 4%, whilst taking into account currency movements they jumped 14%. Naked Wines said that “revenue growth (at constant currency) in our biggest markets improved sequentially during the quarter.”
The business expects to report adjusted EBIT of around £4 million for the first fiscal half, it said. This is up from earnings of £1.2 million it recorded in the same 2021 period.
Naked Wines also announced that chairman Danny Rawlings will vacate the role with immediate effect. He will leave the board at the end of the month, too.
David Stead will replace Rawlings as chairman from today.
“As the company initiates its new plan, with a strong cost agenda, we believe that it is the right time to transition the role of chairman,” Rawlings said.