2023-07-31 22:00:00 ET
Summary
- Naked Wines is stabilizing operationally after a disastrous year in 2022 with a share price decline of 80%.
- The company's new business plan focuses on reducing costs, depleting inventories, and achieving sustainable profitability.
- Jack Pailing, Managing Director of Colebrooke Partners, has been nominated to the Supervisory Board, along with the return of founder Rowan Gormley as Chairman.
The following segment was excerpted from this fund letter.
Naked Wines ( NWINF )
Another major change has occurred at Naked Wines. After the company had survived a catastrophic year 2022 with a share price development of -80%, there are early signs that the situation is stabilizing operationally.
I wrote in the 2022 annual report:
In October 2022, Naked Wines presented a new business plan for the coming two years. The sights are set significantly lower than before. The key points are less investment in customer acquisition, a depletion of the bloated inventories, and a reduction of fixed costs. The goal is to achieve sustainable profitability. I see a very real chance that these key points are attainable.
With the business figures published in July 2023, the company was able to demonstrate that it could begin to pull off these points as announced. Naked Wines was operationally profitable in the fiscal year, which ended March 30, 2023, and capital tied up in wine storage started to be released, as expected.
In the course of the poor operational development and the inadequate communication of the last year, it became obvious to me that an ownership role was missing on the Naked Wines board of directors.
Finally, in April of this year, we were able to announce on behalf of the Investmentaktiengesellschaft für langfristige Investoren TGV that we would welcome Jack Pailing, Managing Director of Colebrooke Partners, as a member of the Supervisory Board and support his selection as the shareholder nominee.
Jack, a long-time shareholder himself with his investment vehicle, was introduced to me through a mutual friend who is also a shareholder of Naked Wines. I quickly grew fond of him in several face-to- face meetings and conversations. He possesses intelligence, energy, and integrity. And even though, despite his wealth of experience, he has no previous supervisory board experience, he will make up for this shortcoming with keen common sense and will undoubtedly represent the voice of all shareholders well.
Finally, a bit of luck was also involved: at the same time as the announcement of Jack Pailing’s nomination, it was also announced that the founder of Naked Wines, Rowan Gormley, who resigned at the end of 2019, will return to the Supervisory Board in the role of Chairman. Rowan, who was initially one of the key reasons we were interested in investing, is a fantastic addition to overcoming the challenges that lie ahead for Naked Wines.
It’s about nothing less than the crucial question “ Which path will Naked Wines take in the future”? As soon as the two-year business plan from October 2022 has been implemented, the company must actively decide in which direction it wants to go. Should expensive investments in faster growth and further expansion within the US be prioritized? Or should the emphasis be placed on profitability with a likely much lower growth rate?
The nominations of Rowan and Jack are essential and of great importance for answering these crucial questions. Where previously, there were disagreements between different shareholders and within the company, we can now be confident of having an experienced captain in Rowan and a competent shareholder representative in Jack. I am confident that the newly formed Board will find a rational and sensible response to the challenges ahead.
This, in turn, also makes the work for the operational team around Nick Devlin and James Crawford easier, as hopefully, there will be a clear direction again in the future. Many of the issues that kept management from its actual tasks in the past quarters will then probably be in the past.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
TGV Partners - Naked Wines: Survived A Catastrophic 2022, Seeing Early Stabilizing Signs