Naked Wines lifts underlying profit and cash despite a 20% revenue fall

A smaller business, but a more profitable one

Naked Wines has delivered a mixed set of full-year results. Revenue fell sharply and the statutory loss widened, but underlying profitability, margins and net cash all improved.

That contrast sits at the heart of the investment case. Management is deliberately shrinking the company by cutting unprofitable customer acquisition and reducing costs. The strategy appears to be producing better economics, but it has not yet stabilised member numbers or sales.

For the 52 weeks to 30 March 2026, revenue dropped 20% to £199.1 million. However, adjusted EBITDA excluding inventory liquidation and associated costs rose 13% to £7.6 million, slightly above the top of the company's £5.5 million to £7.5 million guidance range.

This measure strips out the costs of selling excess inventory, along with other adjusted items. It is useful for assessing the core operation, but investors should also pay close attention to the statutory figures and cash movements.

Naked Wines' key FY26 figures

Metric	FY26	FY25	Change
Revenue	£199.1 million	£250.2 million	-20%
Adjusted EBITDA excluding inventory liquidation and associated costs	£7.6 million	£6.7 million	+13%
Gross profit margin	19.9%	18.4%	+150 basis points
Statutory loss before tax	£6.3 million	£4.9 million	Loss widened
Free cash flow	£10.6 million	£18.5 million	-£7.9 million
Net cash excluding lease liabilities	£33.4 million	£30.1 million	+£3.3 million
Inventory including staged winemaker payments	£97.2 million	£107.6 million	-£10.4 million
Closing members	486,000	581,000	-95,000

The margin improvement is encouraging. Gross profit margin increased from 18.4% to 19.9%, helped by price rises, lower fulfilment costs, better first-order acquisition economics and inventory provision movements.

Management said price increases introduced during the second half should make a greater contribution in FY27 as their effect is seen across a full year.

Revenue contraction is still the main concern

The 20% revenue decline was not an accidental side effect. Naked Wines substantially reduced marketing investment because previous customer acquisition economics were not producing acceptable returns.

Investment in new customers fell to £9.2 million from £20.8 million. Management said this reduction, alongside the continuing decline of customer groups acquired during FY21 and FY22, was the main reason for lower revenue.

The member base consequently fell from 581,000 to 486,000. Management acknowledged that it acquired fewer customers than planned and underestimated the effect of lower marketing spending on volumes.

There are signs that the remaining membership is becoming more valuable and durable. Member retention improved to 76% from 75%, while retention among members of at least two years reached 80%, up from 78%.

Revenue per member was £388 compared with £395, although it increased 1% at constant exchange rates. Customer satisfaction also remained strong, with the Net Promoter Score rising to 77 from 76. Net Promoter Score measures how likely customers are to recommend the business.

The question is whether Naked Wines can eventually translate this more loyal core into stable revenue. Management has been clear that this will not happen during FY27.

Customer acquisition is improving, but volumes are low

Customer acquisition cost increased from £74 to £76 on a reported basis, although it fell at constant currency. More importantly, acquisition break-even improved from 75 months to 42 months.

Acquisition break-even is the time required for profit from a new customer to cover the cost of acquiring them. A reduction of 33 months is meaningful, but 42 months remains a lengthy payback period.

Management expects to reach its 24-month target in the first quarter of FY27 and says further improvements are already evident. However, acquisition volumes remain low, so better economics are currently being achieved on a much smaller scale.

This creates a delicate balancing act. Spending too freely could weaken returns, while remaining too cautious could prolong the decline in members and revenue.

Cash generation and inventory progress

Net cash excluding lease liabilities increased to £33.4 million, even after the company committed £6 million to share buybacks. Naked Wines said underlying cash generation before those buybacks was £9 million.

Free cash flow remained positive at £10.6 million, although this was below the prior year's £18.5 million. The slowdown mainly reflected a lower rate of inventory reduction as stock levels in the UK and Australia moved closer to normal.

Total inventory, including staged payments to winemakers, fell by £10.4 million to £97.2 million, its lowest level in five years. Of that reduction, £3.9 million reflected foreign exchange and non-cash movements.

The company expects the remaining inventory unwind, mainly in the US, to release more than £34 million over the medium term, with most of that cash expected in FY29 and FY30. However, selling surplus stock carries a cost. Guidance points to $14 million of inventory liquidation costs by the end of FY30.

Why the statutory loss widened

The statutory loss before tax increased to £6.3 million from £4.9 million, while the loss for the year was £6.6 million.

The results included £6.0 million of adjusted items, compared with £1.3 million previously. These principally comprised £3.7 million of restructuring costs, a £1.8 million impairment of non-current assets and a £0.7 million write-off of internally generated software.

The software charges followed the decision to replace the legacy in-house digital platform with a third-party software-as-a-service, or SaaS, platform. SaaS means externally hosted software accessed as a service rather than owned and maintained entirely in-house.

Naked Wines expects this transition to lower capital expenditure and produce up to £5 million of annualised general and administrative savings by the end of FY29. The migration may cause some transitional disruption, however, and the promised savings still need to be delivered.

Cost savings and shareholder returns

Naked Wines says it has actioned or identified £25 million of annualised savings since March 2025, exceeding its £23 million medium-term target. These savings should fully affect FY27 and help absorb the implementation costs of the new digital platform.

The company also completed a 7.7 million-share buyback, including purchases after the financial year-end. This represented 10.5% of the issued share capital at the start of April 2025.

Management remains committed to further shareholder distributions, including potentially significant ad hoc returns. Any investment, including possible acquisitions, must clear a 20% internal rate of return hurdle. This is the minimum annualised return management requires before committing capital.

FY27 guidance shows the trade-off clearly

FY27 guidance	Range or target
Revenue	£158 million to £175 million
Adjusted EBITDA excluding inventory liquidation and associated costs	£7.6 million to £9.0 million
Net cash excluding lease liabilities	£34 million to £42 million

Even at the top of guidance, FY27 revenue would remain below FY26's £199.1 million. Yet adjusted EBITDA is expected to hold steady or grow, while net cash should rise.

That would support management's claim that Naked Wines can generate more profit and cash from a smaller sales base. The medium-term target remains adjusted EBITDA of £9 million to £14 million, alongside more than £45 million of cumulative cash generation by the end of FY30 before shareholder distributions. Of that cash target, £9 million has been delivered.

What investors should watch next

The positives are stronger margins, improved customer payback, a robust cash position and cost savings running ahead of plan. Retention and customer satisfaction also suggest that the core proposition remains attractive to established members.

The negatives are equally clear. Revenue is expected to fall again, member numbers have not stabilised, free cash flow has declined and the statutory loss has widened. There is also execution risk around the digital platform migration and the continuing disposal of surplus US inventory.

FY27 therefore looks like another year of managed contraction rather than a return to growth. The key test is whether Naked Wines can keep increasing underlying profit and cash without shrinking the customer base so far that future growth becomes harder to restart.