Naked Wines turns in 'strong' performance as it invests in new customers

(Sharecast News) - Naked Wines reported a "strong" performance in its full-year results on Friday, with total sales rising 68% to £340.2m.
The AIM-traded firm said the growth was driven by an accelerated shift to online wine purchasing due to the Covid-19 pandemic, as well as investment in customer acquisition and "favourable" customer retention and frequency trends.

It reported strong growth in all three of its geographies in the 52 weeks ending 29 March, particularly the United States segment, where sales grew 78% to £161.7m.

The US now represented 48% of total sales, and was now the company's largest market.

Naked Wines said it invested £50m in new customers, compared to £23.5m in the 2020 financial year, delivering a five-year forecast payback of 3.0x.

Repeat customer contribution profit was 83% higher year-on-year at £84.9m, with an enhanced margin of 30%, up 320 basis points.

The company made an adjusted EBIT loss of £1.5m, and a loss before tax of £10.7m, which the board said reflected the 113% increase in Investment in new customers in the year.

"We have seen a continued strong performance in our repeat customer base in the first two months of the 2022 financial year, with total sales up 8% year-on-year on a constant currency basis," the board said of its current trading.

"Repeat customer sales grew over 30%, which has been partially offset by the normalisation of new customer sales given the strong comparative in the prior year and lower level of investment spend.

"Performance for the first two months of the year versus the same period in the 2020 financial year has significantly increased, with total sales rising 96%, repeat customers sales up 107% and new customer sales ahead 30%, on a constant currency basis."

For the 2022 financial year, Naked Wines said it expected total sales of between £355m and £375m, with an investment in new customers of £40m to £50m, with "continued discipline" and a "data-driven approach" to creating value.

The firm said it was anticipating a repeat customer contribution profit of £85m to £90m, with its repeat customer contribution margin expected to decline slightly as it expected around half of the increase from the 2021 financial year to be enduring, while repeat customer sales retention was expected to be in the mid-70 percentage points, below its long-term average of 83%.

General and administrative costs were pencilled in at £46m to £49m, as it invested in strategic initiatives.

"Since inception, our mission at Naked has been simple - to disrupt the wine industry for the benefit of customers, our winemakers and our people," said chief executive officer Nick Devlin.

"In the 2021 financial year, we made significant progress towards this objective. 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.

"As we head into the 2022 financial year, we are focussed on investing in the opportunity and executing against our strategic initiatives, which are to invest in new customers at attractive payback, to enhance the customer proposition to improve loan-to-value, to leverage our scale to enhance value creation, and to broaden and enhance our go-to-market strategy, driving growth."

At 0925 BST, shares in Naked Wines were down 1.01% at 785p.