Naked Wines to liquidate £40m of excess inventory

Online retailer Naked Wines will liquidate £40m of inventory as part of CEO Rodrigo Maza’s “powerful plan”.

Naked Wines is today holding a strategic meeting for shareholders and investors during which CEO Rodrigo Maza will outline his detailed plan for taking the company forward. Having stepped into the role in February 2024, Maza had a steep hill to climb to right the business which has struggled with falling sales and customer retention over the last few years.

In September 2023 the company reported a £15 million loss as its sales dropped to £26.9 million, down from £34m in 2022. The following year, sales dropped a further 15% in the first half of 2024 to £112.3m, causing the value of Naked shares to plummet by nearly a third.

Despite the sliding numbers, management at the time insisted that the business was in “a better position, both financially and strategically”.

It’s a message the company is keen to reinforce with Maza saying that over the past 18 months, Naked Wines has “made significant strides in strengthening its financial position.”

Disciplined approach

Maza’s main goal right now, which he will communicate in today’s meeting, is to “achieve £75 million cash from the March 2025 balance sheet”. This he will do partly by “liquidating £40 million worth of excess inventory”.

Selling off excess or unwanted stock, often at a reduced price, is a way for businesses to quickly convert assets into cash and free up warehouse space. This tends to be done to recover some of the invested capital and can be a strategy for managing inventory more efficiently.

In Naked’s case, the liquidation of stock is all part of Maza’s new “disciplined approach to capital”, according to a release issued by the company.

Naked has been working to sell its surplus inventory for a while now, with the UK and Australia back to “normal inventory levels”, although US inventories remain “significantly” in excess, the business revealed in its latest set of financial results. Naked has said it is “currently investigating options to reduce inventory levels more quickly”, which would help drive improved cash over the next two financial years, but “but could lead to increased liquidation costs, and result in EBIT at the lower end of guidance”.

Excess stock

The surplus inventory issue in the US is by no means a ‘Naked problem’, with companies and producers across the globe weathering the same headwinds. In Silicon Valley Bank’s 2025 wine industry report, released in January, analysts stated that inventory issues in America “would persist throughout 2025.”

“Clearing backed-up wholesale inventory and returning to predictable depletion volumes will likely take most, if not all, of 2025 and possibly continue into 2026,” the report said.

SVB predicted that the off-trade wine sector will move back to “zero percent inventory growth by volume between 2027 and 2029.”

So why so much surplus stock?

“When interest rates went up, retailers started carrying less and less inventory,” Dale Stratton, analyst for Wine & Spirits Wholesalers of America (WSWA) told the drinks business.

There is also a hangover of surplus stock left over from the Covid-19 pandemic, which means US retailers have been less inclined to take on more. Evidence of this can be seen from data supplied by the French Association of Wine and Spirits Exporters (FEVS), which showed that exports of all French wines and spirits to the US plummeted by 22% in 2023.

Positive realism

Maza stressed that his plan for 2025 and beyond is designed to “ensure the business is profitable in all realistic scenarios.”

Emphasising the positives, he revealed that Naked Wines is now adjusted Free Cash Flow positive, and that he anticipates revenues to stabilise by the financial year 2029 at about £200-£225m, which would return the business to a health not seen since before 2023.

The Naked boss expects underlying EBITDA to “progressively build to £10m-£15m over the Medium Term”.

“A year ago, I made a commitment to deliver real value to all our stakeholders,” Maza announced. “We now have a powerful plan that fulfils that promise. We will look to commence distributions, unlock capital from surplus inventory, double down on serving our most valuable members, and transform how we attract and retain new customers.”

 

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