Naked Wines raises glass to transformative year as it upgrades forecasts

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What it does

Naked Wines Plc (LON:WINE) is an online platform that connects wine drinkers with the world’s best independent winemakers.

Naked Wines customers commit to a fixed prepayment each month which goes towards their next purchase, then the company in turn funds the production costs for winemakers, generating savings that are passed back to its customers.

Last year, it have served over 750,000 individual customers in the US, UK and Australia.

 

How it is doing

In November, the AIM-listed firm upgraded its sales forecasts after a stellar first half in which revenues were up by 80%.

The online retailer raised its ‘central case’ growth assumptions to 55%-65% for the 12 months to the end of next March.

First-half revenues were £157mln with the repeat contribution growing by 89% to £36.2mln. The repeat customer profit margin increased by 3.5 percentage points to 29%.

 

What the boss says: Nick Devlin, chief executive

“Naked Wines is a bigger, better business than it was twelve months ago. The last six months have been a critical period in the development of the company.”

“Ultimately the most significant impact of COVID-19 on Naked Wines is not found in these interim results, but in the way it has accelerated the growth of the online wine category and increased consumer willingness to trial a new and better way to buy wine.”

“Looking ahead, whilst the economic outlook remains uncertain, we move into the second half with continued trading momentum, supported by a strong cash balance and with conviction in the potential to unlock further growth opportunities in all our markets.”

 

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What the broker says

Peel Hunt has a ‘buy’ recommendation on the stock, with a 660p target price.

In February it identified the company as a market share winner, with potential for big upgrades.

“If ever a business had engagement, one that puts its new customers on a monthly direct debit is going to be high up the list. Naked is seeing 37% growth in active Angels [customers], with improved retention and purchase frequency, and the contribution per new Angel tracking up 99% on historic averages.”

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