The share price of Naked Wines is likely to come "under pressure" unless management "directly address concerns" within the business, leading industry analysts have warned.
Adam Tomlinson and Wayne Brown of Liberum Capital were commenting as Naked Wines posted a 16% reported increase in revenue growth in the first half of the year; a performance that the business said was 'broadly on track' with expectations.
Standalone Business
The pure-play online business is now a standalone entity due to the disposal of Majestic Wines and other entities. It reported a total loss for the period after tax of £6.4 million.
Announcing its results, the group added that Rowan Gormley, its CEO, will retire from the business following the Christmas trading season, with Nick Devlin, the current COO of the business, installed as chief executive.
"The trading performance of Naked has worsened," Liberum's Tomlinson and Brown said in a briefing note. "Guidance for growth spend to acquire new customers has been reduced, sales retention rates are not where they should be and paybacks have fallen again. The CEO and Naked Wines founder is leaving.
"Due to a lack of financial information until these results (and we need time to assess whether the company has provided adequate depth and breadth of information) we have been unable to have live forecasts, so we will update these in due course. Hence, we keep our recommendation and TP U/R, but our overriding thoughts are that there is nothing here that is likely to drive the shares higher."
'Next Chapter'
In its statement, Naked Wines said that it is now 'entering the next chapter' of its growth, and is 'well capitalised to focus on high growth in a large addressable market', particularly the US.
It is also unveiling initiatives to 'strengthen [its] customer proposition', as well as boost its winemaker portfolio.
Also commenting on the group's performance, analyst Eleonora Dani of Stifel said, "The main challenge of the business is to find customers that are sensitive to ethical subjects (i.e., supporting independent winemakers). We see conversion rates from customer acquisition investments as the main hurdle in the investment case, with increasing investments required to find additional angels.
"However, once the business finds the right customers, we see acceptable returns and sustainable churn rates."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
