Naked Wines lifted profit despite a 20% drop in sales

Naked Wines reported stronger profitability and cash generation for its latest fiscal year even as sales fell sharply, underscoring how online wine sellers are trying to protect margins in a weaker demand environment.

The British wine retailer said adjusted EBITDA for the 52 weeks ended March 30 rose to £7.6 million, slightly above its guidance range of £5.5 million to £7.5 million. Revenue fell 20% to £199.1 million, while net cash excluding lease liabilities increased to £33.4 million from £30.1 million a year earlier. Gross margin improved to 19.9% from 18.4%.

The company said the results reflected a strategy focused on tighter cost control, cash generation and a reset toward what it called a smaller but more profitable core business. Rodrigo Maza, the chief executive, said the company had imposed stricter discipline on spending, raised prices and acquired fewer customers with higher expected value.

The figures offer a clear signal for the beverage sector, especially for direct-to-consumer wine. Naked Wines’ results suggest that profitability is improving less through volume growth than through pricing, lower marketing spend and inventory discipline. That could shape how independent winemakers are financed through the platform and could eventually influence what consumers pay for wine sold online.

Naked Wines operates in Britain, the United States and Australia and says its model helps fund independent winemakers in advance of production. The company has built its business around members known as “Angels,” who help finance wines and then buy from an exclusive range.

Its statutory loss before tax widened to £6.3 million from £4.9 million in the prior year. The company said that included £6.0 million of adjusted items, up from £1.3 million a year earlier. Those charges included £3.5 million in restructuring costs, £1.8 million in impairment of non-current assets and £0.7 million related to software costs written off.

Free cash flow fell to £10.6 million from £18.5 million. Naked Wines said that decline was mainly due to inventory reductions happening at a slower pace than in the previous year as stock levels normalized in Britain and Australia. Total inventory, including staged payments to winemakers, fell to £97.2 million from £107.6 million, which the company described as its lowest level in five years.

The company also said it returned £6 million to shareholders through share buybacks during the period, with the final portion completed after year-end in June. It said the full repurchase program covered 7.7 million shares, equal to 10.5% of the issued share capital at the start of April 2025.

Operational measures were mixed but generally improved on efficiency and customer quality rather than scale. Member retention rose to 76% from 75%. Net Promoter Score increased to 77 from 76. Customer acquisition cost rose to £76 from £74, although the company said it declined at constant currency and had improved significantly so far in fiscal 2027 despite low volumes. Revenue per member was £388 compared with £395 a year earlier, though the company said that metric was up 1% at constant currency.

One of the clearest changes came in acquisition economics. Naked Wines said its acquisition break-even period improved to 42 months from 75 months a year earlier, reflecting a sharper focus on customers expected to generate better returns over time.

Management said it has now executed and identified £25 million of annualized savings since March 2025, ahead of its medium-term target of £23 million. Most of those savings came from marketing costs, according to company statements, and they are expected to have their full effect in fiscal 2027. Naked Wines also said those savings should offset implementation costs tied to a shift to a third-party software platform announced in April.

That digital transition is intended to improve customer experience and key performance indicators while lowering future costs, though the company warned there could be temporary disruption during the migration to the new software-as-a-service platform.

For fiscal 2027, Naked Wines forecast revenue of £158 million to £175 million, implying another decline from fiscal 2026 levels as it continues its strategic reset. It expects adjusted EBITDA of £7.6 million to £9.0 million and net cash excluding lease liabilities of £34 million to £42 million.

The company also said price increases introduced in the second half of fiscal 2026 should have a larger effect in fiscal 2027 because they will be reflected for a full year. At the same time, it expects continued cash generation even before sales stabilize.

Maza said member numbers and revenue had not yet stabilized, but he said profitability, cash generation and the quality of the member base should continue to strengthen during fiscal 2027.

The chairman, Jack Pailing, said the board had concluded that Naked Wines should not try to compete at the lowest end of the market against larger discount-led retailers. Instead, he said, the business is better positioned with customers who value winemaking craft, direct links to producers and a more engaged membership community.

That stance matters beyond one company’s earnings report because it points to pressure across online alcohol retailing: operators may be moving away from heavy discounting and broad customer acquisition toward narrower segments with stronger loyalty and better margins. For wine producers that rely on these channels for upfront funding or route-to-market access, that shift could mean more selective support and greater emphasis on premium positioning.

Naked Wines reaffirmed its medium-term goal of generating more than £45 million of cash before distributions by the end of fiscal 2030 and said about £9 million of that had already been achieved. It also said it intends to continue making shareholder distributions in fiscal 2027 and beyond, including additional ad hoc or significant returns where appropriate.

The company added that it now applies a strict internal rate of return hurdle of 20% for all investments, including any potential acquisitions or other external opportunities.