Naked Wines PLC on Tuesday said it swung to an annual loss, despite revenue rising, due to an one-off impairment arising from a strategic shift to short-term profitability and cash generation away from its prior customer acquisition focus.

Shares in Naked Wines were down 6.1% to 65.70 pence each in London on Tuesday after midday.

In the 53 weeks that ended April 3, the Norwich-based online wine seller swung to a pretax loss of £15.0 million from a profit of £2.9 million in the prior 52 weeks that ended March 28, 2022.

This was despite revenue ticking up to £354.0 million from £350.3 million, as it incurred a one-off impairment of goodwill, property, plant and equipment and right-of-use assets of around £18.2 million during its financial 2023.

‘This impairment charge forms part of the one-off exercise undertaken in the year to better align purchasing and inventory management going forwards whilst still ensuring the group holds sufficient inventory to meet customer demand,’ Naked Wines said.

General and administrative costs rose 23% to £53.1 million from £43.1 million, alongside fulfilment costs rising 8.9% to £68.2 million from £62.6 million, while advertising costs almost halved to £17.7 million from £34.1 million.

In current trading, Naked Wines said its financial 2024 has started off slower than expected, with first quarter revenue down 18% from the equivalent period a year earlier.

It blamed downbeat first quarter performance on sales to new customers being 41% lower, noting that the comparative period being prior to the company’s pivot to profitability and reduction in new customer investment.

This was alongside sales to repeat customers falling 15% in the first quarter of financial 2024 from a year earlier. Naked Wines said this reflected a smaller customer base year-on-year.

With first quarter revenue below its initial plan, Naked Wines said it is ‘marginally behind’ its destocking plans but that it has taken steps to‘further reduce future purchase commitments while continuing to manage costs ’tightly‘.

Looking ahead, Naked Wines said it expects financial 2024 revenue to fall between 8% and 12% on a constant currency basis, as the financial 2023 comparison eases in the second half of the year and the rate of decline in customer base slows.

‘The trading environment is tough, but Naked remains highly resilient. We have taken decisive action and have met the key goals in our ’pivot to profit’ strategy. Our focus now is on delivering profitable growth,’ said Chief Executive Nick Devlin.

‘We recognise that the environment is likely to remain tough and are configuring the business to be profitable and cash generative despite challenging conditions. A leaner and more focussed Naked will be best placed to deliver for our customers and winemakers. I believe we can emerge from these challenges a stronger business.’

Net cash at April 3, excluding lease liabilities, stood at £10.3 million from £39.8 million at March 28, 2022, with total available liquidity in its cash and credit facility rising to £49.1 million from £39.8 million.

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