(Alliance News) - Naked Wines PLC remains an "enigmatic" firm after a cryptic duo of updates, which resulted in a sharp share price slide on Wednesday.
Shares in Naked Wines were down 41% at 85.47 pence in London on Wednesday afternoon. So far this year, the stock has shed 87%.
Naked Wines late Tuesday said it is mulling plans to improve profit and keep a lid on costs as it grapples with slower sales progress due to pandemic tailwinds unwinding.
The Norwich, Norfolk-based firm also said Pratham Ravi, a non-executive director, stepped down effective immediately. Ravi was appointed in August and is an analyst at Punch Card Capital LP, one of online wine retailer's largest shareholders.
Naked Wines said it is "reviewing potential operational and financial plans for the next 18 months".
"The group's focus is on developing plans demonstrating increased profitability, cost restraint and improved payback. Alongside this process we are in active discussions to address our credit facility to reflect any revised plan," Naked Wines explained.
It said it is in compliance with all its financial obligations related to the loan. It expects to have the capacity to meet second-quarter covenant tests.
Davy said the wording around the update was "curious", leaving the broker "unsure quite what to make" of it.
"There is clearly some strategic introspection at work and seemingly possible tension around credit facilities," said Davy.
Liberum concurred, believing something has "gone somewhat awry".
Liberum said the update could signal that Naked Wines is clearing or liquidating stock to achieve headroom in its covenant tests.
"With near GBP150 million of inventory this would seem sensible but could create quite a nasty surprise come the trading update in just over a month," Liberum said.
Further, Liberum speculated that the two releases on Tuesday evening - the business update and Ravi's departure - are linked. But the updates raise more questions than they answer - such as, what happened for Ravi to leave less than a month after his appointment? What is Punch Card's view of Naked Wines's new strategy?
"Until we get more detail and understand the impact of a) potentially clearing stock to increase liquidity, b) where the SG&A costs will be cut, c) the scope of new customer investment going forward and d) how the group will finance itself – we think the shares will continue to fall. Overall, the departure of the non-executive director is very concerning indeed," said Liberum.
Naked Wines has fallen from grace after trading above 900p a share back in April 2021, as the company - which sells wine from independent winemakers to its subscriber base, known as 'Angels' - got a boost from pandemic lockdowns, when bars and restaurants were shut.
Naked Wines was bought by bricks-and-mortar retailer Majestic Wine back in 2015 for GBP70 million.
Majestic Wine then announced plans to rename itself to Naked Wines in March 2019 as it doubled down on the online retailer, and secured the sale of its eponymous retail and commercial units for GBP95 million in August of that year.
By Lucy Heming; lucyheming@alliancenews.com
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