Naked Wines sees FY losses widen! Should I buy this UK share?

The Naked Wines share price continues to crumble despite the release of sunny sales figures. Here’s what I’m doing about this UK share right now.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Naked Wines (LSE: WINE) share price has been fermenting nicely during the last 12 months. Trading at the online-only booze superstore has soared during Covid-19 lockdowns and accordingly the business has risen 107% in value.

Naked Wines’s share price has trended lower in recent weeks, though, as the emergence of the Delta coronavirus variant has pushed infection rates higher again. This has fuelled fears that the government’s plans to fully re-open the hospitality and leisure sectors on 21 June could be disrupted. It has also cast a cloud over the extent of social gatherings in the UK.

Naked Wines has dropped a further 6% in Friday trading, too. It was last trading at 746p per share despite announcing a sharp sales increase for last year.

Revenues soar but losses increase

Today’s full-year trading statement showed revenues soar 68% during the 12 months to March 2021, to £340.2m. Naked Wines said that this had been driven by “the accelerated channel shift to online wine purchasing due to Covid-19, investment in customer acquisition and favourable customer retention and frequency trends”.

The AIM-quoted firm said that it had enjoyed “strong” growth across each of its US, UK, and Australian territories. But it said that turnover was particularly robust in its North American marketplace. Revenues here soared 78% year-on-year to £161.7m.

The number of active customers at Naked Wines climbed 53% from the previous year to number 886,000, it said. But a soaring top line couldn’t stop the e-retailer recording another annual loss. This clocked in at £10.7m, widening from the £5.4m reversal it endured in fiscal 2020.

A bright start to the new year

Losses at Naked Wines worsened last year as the company doubled-down on investment to attract new customers. The company spent £50m in financial 2021, up 117% from what it spent the year before. And Naked Wines plans to continue spending heavily and has earmarked a budget of £40m to £50m on similar activities like advertising in the current fiscal period.

The company said that sales in the first two months of financial 2022 were up 8% year-on-year. It has forecast full-year sales of between £355m and £375m too.

Here’s what I’m doing about Naked Wines

City analysts think that Naked Wines will endure another pre-tax loss this year. But they believe this will narrow to around £3.3m. Current consensus suggests that the business will break into the black with profits of £4.3m in financial 2023.

In my opinion there’s a lot to get excited about with Naked Wines. Its online-only model could provide plenty of upside as e-commerce takes off. It is also impressively expanding margins at it focusses on its fast-growing US marketplace. But I worry about whether or not the UK retail share is massively overvalued at current prices (it trades on a forward price-to-earnings ratio of 98 times for next year). I’m happy to pass on Naked Wines today and buy other British stocks instead.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of Naked Wines. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »