Naked Wines plans to invest more in US to keep up strong sales momentum

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Naked Wines PLC (LON:WINE) said it plans to invest and intensify its focus in the lucrative $20bn US market, building on strong sales momentum in the past year.


The online wine retailer increased sales 68% to GBP340.2mln in the year to 29 March as people developed a taste for its wine subscription model amid the Coronavirus (COVID-19) pandemic-driven shift to online shopping.


A GBP50mln investment in new customers, more than double the amount from the year before, is forecast to deliver a five-year payback of threefold sales growth.


Adjusted losses before tax of GBP0.5mln were reduced from GBP2.9mln a year earlier. The statutory loss before tax of GBP10.7mln reflected the 113% increase in new customer investment.


But free cash flow generation was strong at GBP30.6mln, meaning there was s GBP85.1mln in the bank at the end of March, which the company said was sufficient to execute its plans for the 2022 financial year.


With continued good trading in the first two months of the new period, with total sales up 8% year on year on a constant currency basis and repeat customer sales growing over 30%, the company gave guidance for total sales for the year of GBP355mln-GBP375mln.


There will be GBP40mln-GBP50mln of investment in new customers, while general and administrative costs are expected to be GBP46mln-GBP49mln as investment is made in strategic initiatives.


Repeat customers are expected to contribute GBP85mln-GBP90mln of profit, compared to GBP84.9mln in the past year, with repeat customer contribution margin expected to decline slightly and repeat customer sales retention expected to be in the mid-70%s, below the long-term average of 83%.


“It is clear to us that the pandemic has served to underscore the value of our business model in connecting winemakers and consumers directly and proven the opportunity before us,” said chief executive Nick Devlin.


For the new year he added, “we are focussed on investing in the opportunity and executing against our strategic initiatives, which are i) to invest in new customers at attractive payback, ii) to enhance the customer proposition to improve LTV [lifetime value], iii) to leverage our scale to enhance value creation, and iv) to broaden and enhance our go-to-market strategy, driving growth.”

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