Naked Wines PLC (AIM:WINE, OTCQX:NWINF) returned to profit in the 52 weeks to 28 March on the back of a 9% increase in its subscription base.
Total sales increased by 5% on a constant currency (CC) basis to £350.3mln from £340.2mln the year before. Compared to two years previously, a period that was largely pre-pandemic, group sales were up 78% on a CC basis.
The repeat customer sales retention rate in the period eased to 80% from 88% the year before, with repeat customer sales rising 13% on a CC basis.
Adjusted earnings before interest and tax (EBIT) were positive at £2.0mln versus a loss of £1.5mln the year before while adjusted profit before tax was £3.0mln compared to the previous year’s loss of £10.7mln.
The group ended the year with a closing cash balance of £40mln, down from £85mln a year earlier, and increased inventory assets of £142mln compared to inventory assets a year earlier of £76mln.
The group said it expects roughly break even this year on an EBIT plus depreciation and amortisation (EBITDA) basis this year, excluding share-based compensation and non-cash charges.
Total group sales are expected to be in the range of £345mln to £375mln, based on a sterling exchange rate of US$1.299. Chief executive Nick Devlin said the focus this year will be more on quality than quantity.
"We have driven volume of new members at the expense of quality and in the UK, in particular, have allowed our market positioning to shift to become the lowest price online player - which is not consistent with our ambition to be the world's leading quality online wine platform," Devlin said.
Investment in new customer acquisition is expected to be in the range of £30 million to £40 million, while the repeat customer contribution profit is expected to be in the range of £83 million to 93 million.
“Looking ahead Naked Wines is well-positioned to continue to grow amidst a changing consumer environment. Our enhanced scale, attractive unit economics and healthy balance sheet allow us to continue to invest for growth. At the same time, we will not pursue growth at any cost, and our guidance is that we intend to trade the business at or around break-even this year. We believe this is the responsible balance to strike in FY23, mindful of the levels of macro-economic uncertainty but also of the opportunities we see ahead and the potential for disruptive models like ours to gain traction in tough times as consumers revaluate their purchasing choices,” said Nick Devlin, the group’s chief executive.
“Additionally we will focus on steps to ensure our contribution economics support sustainable growth and on striking an effective balance of quality and volume. I believe these steps will best enable us to increase customer lifetime value and therefore over the mid-term maximise our ability to deliver attractive, sustainable growth," he added.
In a separate announcement, Naked Wines announced that Deirdre Runnette and Melanie Allen will join the board with immediate effect as independent non-executive directors.
Runnette is a corporate lawyer who will bring to Naked Wines balanced experience of scaling a business, as well as valuable insight into the US legal and compliance landscape, the company said.
Melanie Allen is an experienced marketing leader who spent 13 years at Proctor & Gamble before moving to Starbucks, where she undertook multiple marketing leadership roles. She will bring skills in brand marketing, as well as marketing and scaling a directly-to-consumers business in the US market.
Katrina Cliffe has informed the board of her intention to step down from the board on 31 July 2022.
Shares in Naked Wines slumped 35% to 187p in the morning session.
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