Naked Wines (LON: WINE) seems to be just the latest in a long line of UK retailers who think that the US would be a nice market to conquer. To find out that it’s actually harder than it looks. Which is why Naked Wines shares are down 34% today - they’re reporting that the US business isn’t working. They’ve also got rid of the CEO - whose other job was running the American side of the business more directly.
The US market simply is more difficult than many seem to realise: “The Group reported in September 2023 that FY24 had started slower than expected, with Q1 revenue down 18% versus the prior year. This reduction was a combination of sales to new customers being 41% lower, reflecting that the comparable period was prior to our pivot to profitability and reduction in new customer investment; and sales to repeat customers being 15% lower, reflecting the smaller customer base year on year. While Q2 trading in the UK and Australian markets has been broadly in line with the forecasts supporting prior guidance, trading in the US during Q2 and October has been weaker than anticipated. In particular, the repeat business has fallen short of targeted revenues and contribution margins.”
As a result, yes, the CEO is gone: “Nick Devlin has agreed with the Board that he will step down from the Board and his role as CEO with immediate effect.”
Naked Wines share price from Google Finance
We’ve talked before about Naked Wines: “As that same report states: “Naked Wines plc announces that the release of its audited results for the 53 weeks ended 3 April 2023 (the "FY23 Results"), due on 6th July, has been delayed.” Well, we’re a month later and still not released as yet. As the saying goes, bad numbers take longer to add up than good. So that’s not encouraging - and nor is the inability to get the accounts done on time.
We’ve also this: “Naked Wines has appointed former CEO Rowan Gormley as chairman of the board, with immediate effect. Gormley, who announced his departure from Naked in 2019, later returned as an advisor in 2022. He will replace David Stead, who will step down as chairman and leave the board.”
So both the Chairman and the CEO gone in only a few months. That’s not encouraging.
As we understand it the real difficulty Naked Wines has is in getting repeat business out of a customer. There are large costs associated with attracting a first time consumer. OK - the profit comes from reselling to them over time. But that’s exactly what they’re not managing to do. The churn of the customer base is simply too high. Which also isn’t a good sign - not being able to retain customers would seem to indicate that there’s something wrong with what the customers are getting.
