Virgin Wines launches ‘business review’ after profits plummet to £0.1m
Online merchant Virgin Wines has launched a “full business review” after a culmination of internal issues, inflationary pressures and the cost-of-living crisis led to a sharp decline in the group’s first-half sales and profits.
Virgin Wines, one of the UK’s largest direct to consumer online wine retailers, today announces its interim results for the six months ended 31 December 2022.
Group profit before tax was down to just £0.1 million, a sharp decline compared with the £3.2m recorded in the first-half results of the previous year.
The group had already issued a profit warning in January, highlighting the decline in revenue to £33.6m, down 17% from £40.6m in H1 2022. A “full business review” is now underway to ensure that the company is “fully leveraging the opportunities available” and positioning itself “as positively as possible for future growth and profitability”, the firm said in a press release about the results published this morning.
A combination of internal logistics issues and external factors were cited by the company as the reason for the fall in profits and sales. Virgin Wines also reported an underlying EBITDA of £1.4m versus £3.9m in the first-half results for 2022.
Inflationary pressures and cost-of-living issues affected consumer spend and frequency of order, according to the group. However, it also cited a number of “one-off” factors which caused profits to plummet.
“Teething problems” with the implementation of the group’s new warehouse management system led to approximately £1.5m in lost revenue.
The two weeks of national mourning following the death of Queen Elizabeth II in September and bad weather and postal strikes during the peak Christmas trading period also had an impact on demand.
Jay Wright, chief executive officer at Virgin Wines, said that “macroeconomic headwinds” had exacerbated internal and operational challenges encountered particularly over the Christmas trading period.
Packaging and delivery costs also increased as a percentage of revenue by 0.8% year-on-year, as a result of the sharp increase in fuel and energy costs.
Despite these challenging results, Virgin Wines has reported good new customer growth. The company said that senior management remains optimistic that its partnerships with Moonpig, Avanti West Coast, LNER, and Great Western Railway will drive revenue through its B2B channel.
The company, a subsidiary of Virgin Group, said it generated 60,000 new customers over the period and recruitment onto its WineBank offering was up 21% year-on-year.
However, share prices took a tumble this morning, down to 1.50% when the market opened this morning. Stock prices have also been down 65% over the last year, according to investment research and consultancy firm Edison Group.