Virgin Wines LON:VINO has not had much to raise a glass to in the last year. Over the year-to-date, the Branson-backed wine retailer had fallen by -30% and over one-year had fallen -64.4% with the AIM-listed company’s shares ranging from 45p to 138p over a 52-week period.
The firm opened trading today (13th March) at 47.3p. The Norwich-based company has a market capitalisation of GBP27.1m.
Investors cannot expect to be raising cheer with regards to the share price any time soon, as back in January, Virgin Wines published a profit warning, saying its: “sales were impacted by some one-off factors, particularly over the Christmas trading period,” with sales expected to come in at around GBP63m, compared to GBP69.2m in 2022.
The company said that it had experienced several “one-off” events that impacted sales and revenues in 2022. These include the death of Queen Elizabeth II where Virgin Wines put a “pause on all marketing activities” which the company said cost it GBP1.7m; the introduction of a Warehouse Management System which didn’t work as expected: “creating a backlog of orders in the peak weeks to Christmas,” which forced it to hire temporary staff to deal with the backlog.
Bad weather
Virgin Wines litany of woe continued, with the online wine retailer saying that bad weather and postal strikes forced it to cut off pre-Christmas orders a week earlier. The company also noted that, possibly as a reaction to the cost-of-living crisis, customers for its WineBank subscription service had reduced their average net spend from GBP258 to GBP231.
The company did say that it had acquired 60,000 “new recruits”, or new customers in the six months ended 31st December 2022, with a “cost per recruit […] better than expectations at GBP13.62” and WineBank membership was at its highest level, boasting 142,000 customers, up 9% from 130,000 in June 2022.
That said total revenue fell around 17% from GBP40.5m in 2022 to GBP33.7m as at end-December 2022.
Virgin Wines operates in the same space as Naked Wines LON:WINE, which has also experienced a tough trading environment, falling -22.8% year-to-date and -74.61% over one year.
However, in its latest trading update, published in January, Naked increased its adjusted earnings outlook from GBP9m to GBP13m, to GBP13m to GBP17m. Presumably Naked will have experienced the same sovereign dying and the same postal strikes and bad weather.
That said, Naked is one of the index’s most shorted stocks, according to Morningstar. Naked also has some exposure to Silicon Valley Bank, which was closed by regulators on 10th March, with the Californian bank (whose UK arm was acquired by HSBC this morning) the administrator and co-lender (with Bridge Bank) for a USD60m asset-backed credit facility.
Naked said in the near-term its cash position is strong, with GBP32m cash-in-hand and GBP14m held in a cash-sweep account with SVB protected by the Federal Deposit Insurance Corporation and the rest of its cash spread across several other banks. In Naked’s case, it hopes that Bridge Bank will pick up SVB’s share of the liquidity facility.
One-off exception
In the January statement, Virgin Wines’ chief executive, Jay Wright said: “We are disappointed with our profitability performance over what has been a difficult trading period, which has been exacerbated by one-off exceptional circumstances.”
Virgin Wines was founded in 2000 by Sir Richard Branson’s Virgin Group. The company was initially launched as part of the Virgin Drinks portfolio, which included various alcoholic and non-alcoholic beverages, but was later sold to Direct Wines Limited in 2005.
In 2013, the company was reacquired in a GBP15.9m management buy-out supported by Mobeus Equity Partners and Connection Capital and relaunched as an independent online wine retailer. In 2021, the company was listed on AIM.
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Virgin Wines operates as a subscription-based business, providing customers with a curated selection of wines from around the world. The company offers a range of subscription plans, including the Discovery Club, which provides members with a selection of 12 wines every three months, and the WineBank scheme, which allows customers to save up credit to use towards future purchases.
The company has been expanding its operations in recent years, with a particular focus on growing its customer base and increasing its online presence.
However, investors might hold off on popping any corks, with interim results for the six months to end-December 2022 expected tomorrow, continuing to leave a sour taste in the mouth, which might linger on the palette for much of the year.
