Naked Wines shares are rising despite mounting losses

  • Total sales fell 20% year-on-year for the 26 weeks to October 2 to £132.3m

Naked Wines has assured investors it is heading for 'a period of sustained cash generation' after sales fell in the first half and losses widened.

The online wine retailer saw total sales fall 20 per cent year-on-year to £132.3 million for the 26 weeks to October 2, while pre-tax losses fell from £200,000 last year.

In attempts to offset the fall, the group's boss told shareholders the company had cut £3 million in costs and plans to cut a further £10 million from operating profit.

The online wine retailer reported that total sales fell 20 percent year-on-year to £132.3 million in the 26 weeks to October 2.

The company also announced that general and administrative costs fell 27 percent year-over-year.

As a result, Naked Wines expects to deliver between £40m and £50m of cash on hand over the next 18 months.

Rowan Gormley, executive chairman of Naked Wines, said: “We are moving into a period of sustainable cash generation.

'We have removed £3m of costs with a further £10m coming and we expect to generate £40-50m of cash from inventory over the next 18 months.

'In addition, we have made good progress in testing an improved customer proposition to help us grow again. I would like to thank our people, our winemakers and our customers for their support and reiterate our determination to ensure they are rewarded for it.”

In November, Naked Wines cut its full-year forecasts and announced that its CEO would be leaving the company.

CEO Nick Devlin agreed to step down 'with immediate effect', with founder and chairman Gormley taking on the role of executive chairman on an interim basis until a successor is found.

The group's share price has fallen by more than 70 percent in the past year.

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown, said: 'Naked Wines has seen its shares rise despite total revenues falling 20% ​​to £132.3m in the 26 weeks to October 2, and losses have became bigger.

'Potentially more worrying is the double-digit decline in recurring revenue, which shows that what should be loyal customers are drifting away. This is a combination of belt tightening and intense competition in the online wine world.

'The group has struggled post-pandemic following rising demand during lockdowns, and issues such as attracting new customers and stock levels have caused problems.

'The group is seeing losses in both pipes of the revenue stream, with both existing and new customers proving fickle and elusive, presenting an uphill battle. Cost savings are good for the bottom line, but not enough and this cannot continue forever. Sooner or later, a meaningful increase in customer activity will be necessary. The positive share price increase is probably more of a sigh of relief that things haven't gotten worse.”

Naked Wine Stocks rose 8.72 percent to 46.75p in Friday morning trading.

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