Naked Wines 'biting the bullet' to liquidate millions in inventory and correct oversupply problem

Its statutory operating loss for the period was £11.8m, a reduction on the £14.3m the year before. But its pre-tax loss widened to £16.3 million from a previous £15m.

Since April the company has secured a new credit facility and said it is trading in line with expectations for the first quarter of this financial year.

The company’s website works by connecting winemakers directly with buyers, who commit to paying a fixed amount each month which goes towards their next wine box purchase.

Naked Wines has cut about 50 jobs as part of a plan to cut costs by £7m, while it has also reduced the size of its inventory – holding £144.9m worth of product at the start of April compared to £165.7m at the same point in 2023.

In a statement to the London Stock Exchange, chairman Rowan Gormley said: “At the height of Covid, the team in place at the time entered into a number of contracts assuming that Covid levels of demand would persist for an extended period.

"This proved to be an incorrect assumption, which took an unhelpfully long time for the team to recognise and remedy.

“This has been compounded by a US bulk market that has the highest oversupply ever recorded.

"There are several reasons behind this, the main one being that the US has had three harvests in a row without the usual natural disasters of floods, drought, fire and frost.

"This has meant that Naked's ability to sell off surplus inventory in the bulk market has been severely hampered.”

He said the company has negotiated with suppliers to reduce and cancel shipments, has set up a dedicated team with a focus on clearing the surplus through third-party sales and is attempting to increase sales volumes through its own channels at lower margins “without cannibalising our core proposition”.

Mr Gormley said: “The good news in all of this is that the inventory is high quality and almost all from the winemakers we expect to keep working with for the long term.

"Where we have not seen a path to selling inventory before it is likely to deteriorate, we have bitten the bullet and cleared or written off that inventory.”

The company is expecting inventory liquidation losses of between £2m and £5m for the current financial year.

Rodrigo Maza, who was appointed as CEO in February, said the company is moving in the right direction.

"I am honoured to lead Naked Wines into its next chapter and our new team is fully focused on returning Naked to profitable growth.

"Over the past few months, we have made significant strides by strengthening our financial foundations, embedding resilient management practices, and importantly, crystallising a robust customer proposition.

"This proposition not only drives our mission to enable independently-minded wine drinkers to enjoy great wine without the guesswork but ultimately ensures long-term engagement and a competitive advantage."

Shares in the company were up 5.8 per cent on Wednesday morning following the publication of the results.