Naked Wines PLC (AIM:WINE, OTCQX:NWINF) said it is cutting its cost base, unwinding inventory levels and has renegotiated its banking facilities as it makes a “pivot to profit” rather than its previous focus on rapid growth.
The online wine seller has issued new guidance to investors for underlying profits (EBIT) of £9mln-£13mln in the year to end March 2023, up from £2mln last year, with “further improvement expected” for the year after too.
Sales are expected to fall in the near-term due to the focus on profits over growth, with full-year revenue now seen falling by 4%-9% to £340mln-£360mln, compared to previous guidance of £345mln-£375mln.
There will be one-off costs of up to £12mln, of which up to £4mln is in cash, to reduce inventory and G&A costs.
Marketing spending will be kept at around £5mln this year but general and administrative costs are to trimmed this year, chief executive Nick Devlin said, with the aim in 2024 being to slash £18mln from the prior guidance, while the target for investment in growth this year is reduced to £22mln-£24mln from £41mln last year.
Banking facilities have been renegotiated onto a “sustainable long-term basis” and reduced future inventory commitments, Devlin said, with £64mln of liquidity available at the September half-year stage.
This included reported net cash of £22mln, down from £40mln at the end of March, reflecting outflows into stock as a result of lower sales and commitments to winemakers.
As part of a destocking plan, Devlin said inventory is peaking now and will remain elevated for 12 months, but lower stock intake in the second half is anticipated to result in cash consumption being “fully supported” by available liquidity and by the end of 2024 will see a “material reduction”.
“We recognise that in pursuit of rapid growth we have made mistakes,” Devlin said in a statement. “Whilst the business today remains materially bigger than pre-pandemic, in 2021 we bought inventory and added to our cost base in anticipation of sustained faster growth which has not been delivered; today we are taking steps to reset our cost base and unwind inventory levels.”
As part of the wider reset, chairman Darryl Rawlings will also step down with immediate effect, replaced by David Stead, the former Dunelm and Boots finance chief who has been a Naked Wines director since 2017.
Deirdre Runnette will assume the role of senior independent director, also effective today.
Devlin said Stead has “a deep understanding of the Naked Wines model combined with extensive operating experience and I believe he will be a great asset to myself and the management team in navigating Naked successfully through the current market and consumer environment”.