Naked Wines Set To Capitalise On 'Permanent Channel Shift' In Wine, Says Analyst
Naked Wines is capitalising on what appear to be signs of a "permanent channel shift" in the purchasing habits of many consumers, a leading industry analyst has said.
Mark Irvine-Fortescue of Stifel was commenting as Naked Wines reported a 68% increase in total sales in the year to 29 March 2021, to £340.2 million (€395.8 million), with its performance boosted by the shift to online purchasing during the pandemic.
"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," Irvine-Fortescue wrote in a briefing note.
"The investment vs payback model has now been well tested, giving us confidence in management opting to lean into the customer acquisition opportunity, deferring profitability."
Naked Wines Performance
Announcing its full-year results, Naked Wine reported an 'unprecedented channel shift' to online, which it said marked an 'inflection point' in the company's history.
It reported strong growth in the three core geographies in which it has a presence, with the US now representing its largest market by sales (48% of the total), following a 78% increase in sales last year to £161.7 million (€188.2 million).
According to the group, it has also seen positive signs in its repeat consumer base even as lockdown measures have eased, with total sales up 8% in the first two months of the year, since year-end.
"Since inception, our mission at Naked has been simple - to disrupt the wine industry for the benefit of customers, our winemakers and our people," commented Nick Devlin, group chief executive. "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."
According to Irvine-Fortescue at Stifel, a "wide range of performance outcomes" are possible for Naked Wines in a post-COVID world.
"The post-COVID trading trajectory is difficult to anticipate with confidence, in particular gauging how much of strong trading during lockdowns will stick and how much lapses," he said. "Data for the next 6-12 months should be crucial to refining medium-term customer growth ambitions and the path to profitability."
Back in January, Irvine-Fortescue wrote that Naked Wines was "coming of age" as a result of its performance during the pandemic.
Stifel has outlined the key risks to the business as including unexpected senior management departures; rising online competition; a change to its suppler relationships; and potential inability to manage the rapid growth and internationalisation of the business.