Naked Wines Jumps 25% on Cost-Cutting Success, Board Shakeup

By Geoffrey Smith 

Investing.com — Shares in Naked Wines (LON:) jumped 26% on Thursday as the struggling wine merchant said that its measures to stabilize the business are gaining traction.

The company also announced a shakeup at the top of its board, with Darryl Rawlings stepping down as chairman to be replaced by the current senior independent director, David Stead. Stead will, in turn, be succeeded by Deirdre Runnette, who joined the board in June.

Naked Wines stock has fallen by nearly 90% in the last 14 months as the effects of the pandemic – which boosted its direct distribution model – have faded. The company admitted earlier this year that its efforts to boost sales with expensive marketing campaigns had failed and that it would “pivot” to focusing on profit over growth in the near term.

Naked Wines issued new guidance to reflect its changed priorities on Thursday and now expects adjusted earnings before interest and taxes to be between 9 million and 13 million pounds in the year through March 2023. It had previously only expected to break even.

Revenue is now expected to fall by between -4% and -9% in constant currencies, although the weakness of is likely to result in a better reported number. In the three months through September, the group’s revenue was up 4% at constant exchange rates and up 14% on a reported basis, as the ‘s rally led to a 12% increase in revenue there. U.K. revenue also improved by 3%.

The company had to change course because it was fast running out of cash. With its new plans in place, it has renegotiated the covenants on its debt facility to give it some £64 million of headroom. It said this would give it flexibility as it embarks on a destocking process after building up too much inventory. That process is expected to last 18 months.

Naked said it’s now trading profitably but expects to record a net loss in the first half due to a £12 million charge, most of which will be non-cash.

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