Naked Wines Plc's annual sales leapt 68% as more people ordered wine online during lockdowns, but a jump in advertising costs led to a bigger loss, results showed on Friday.
Naked Wines, which sells to its 300,000 customer base via a subscription model, said its advertising costs more than doubled to £42.3 million, or about 12% of total sales, for the year ended 29 March, up from £19.8 million a year earlier as it chased new customers in the US and UK.
That paid off, with the Norwich-based company reporting a 53% surge in total customers and a 78% growth in US sales, now its largest market.
However, its shares fell 1.5% to 782 pence by 07:29 GMT as its loss before tax nearly doubled to £10.7 million ($15.15 million). Analysts had estimated a loss of £10.4 million, according to Refinitiv Eikon data.
"Stay-at-home trends have driven a step-change in volumes for the online wine sector, which Naked is capitalising on – with some encouraging signs of a permanent channel shift from offline to online," Stifel analysts said.
However, it is uncertain if the trends would hold up in a post-COVID world, they added.
Naked said its strong performance has continued in the new fiscal year, and estimated an investment of £40 - £50 million in new customers.
Group chief executive of Naked Wines, Nick Devlin, commented, “Since inception, our mission at Naked has been simple - to disrupt the wine industry for the benefit of customers, our winemakers and our people. In FY21, we made significant progress
towards this objective.
"It is clear to us that the pandemic has served to underscore the value of our business model in connecting winemakers and consumers directly and proven the opportunity before us."
Majestic Wine, spun off from Naked Wines in 2019, has also seen record online sales in the pandemic. The specialist wine seller said on Friday it was bracing for its 'biggest ever summer' as it reopens stores.