Naked Wines has indicated it is on the road to recovery after issuing improved profit guidance on the back of what it called a “solid” Christmas trading period.
The company issued a profit warning last June that saw its share price tumble, and later outlined a shift in strategy, from rapid growth through the acquisition of new customers to better profitability from repeat ones accompanied by tighter cost controls.
Naked said today that it was revising its full year 2023 EBIT outlook from previous guidance of £9-13 million to £13-17 million.
Margins from purchases by repeat customers have improved, while revenue in Q3, to December 26, was flat versus the previous year.
Group chief executive Nick Devlin said today: “We have executed well against our pivot, to profit in our key holiday quarter, delivering flat reported revenue versus prior year, improving year-on-year repeat customer contribution margins and tightly controlling our selling, general and administrative (SGA) expenses.
“Against a challenging market environment the robust performance of our repeat customers reflects the enduring appeal of Naked’s core proposition combined with strong operational performance, with increased throughput from our investment in warehouse automation supporting an especially strong peak in the UK.”
Naked’s sales growth from repeat customers was 3% in Q3, with a 27% fall in sales from new customers. UK revenue was down 1% overall.
Devlin added: “The consumer and marketing environment remains challenging and opportunities to invest in new customer recruitment at attractive payback levels continue to be limited.
“We expect to spend £20-24 million on new customer investment in FY23, around 40% below FY22 levels.
“This is below the run rate necessary to maintain our current scale and we are likely to see a modest decline in revenue in FY24 as a result.
“As we enter our detailed FY24 planning cycle we will be evaluating a number of options to improve this outlook while remaining disciplined in our approach to investment evaluation and capital allocation.
“Costs have remained tightly controlled, with SG&A spend outlook at the bottom end of our guidance.”
Naked’s flat revenue update comes days after online rival Virgin Wines reported a fall in sales from £40.5 million to £33.7 million in the six months to December 31.