Virgin Wines announces 'disappointing' profitability performance

By James Bayley

Published: 12 January, 2023

Virgin Wines, one of the UK’s largest direct-to-consumer online wine retailers, has published its trading update for the six months ended 31 December 2022.

Total revenue for the period was £33.7m (FY22: £40.5m), with sales impacted by one-off factors, especially during Christmas trading.

Jay Wright, CEO at Virgin Wines described the results as disappointing and pointed to, “one-off exceptional circumstances”.

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These factors include the postal strikes and bad weather in the lead-up to Christmas. According to Virgin Wines, several couriers brought forward delivery cut-off dates and reduced trailer capacity. This meant Virgin had to cut off its Christmas orders one week earlier than usual to guarantee customer deliveries in time for Christmas. It is estimated that the impact of these factors on the company is approximately £1.5m in lost revenue.

Internal issues also negatively impacted the company as the implementation of a new warehouse management system led to operational difficulties, creating a backlog of orders in the peak weeks to Christmas.

Sales were impacted further still in September following the Queen’s death and a subsequent halt to all marketing activity, resulting in an estimated loss of £1.7m for the company.

However, Virgin Wines continues to attract new customers in significant numbers, with 60,000 new recruits during the period. This was 4% ahead of the comparable period last year and a 24% LFL increase during Q2.

The board expects top-line performance in H2 to remain resilient, although full-year revenue and profit will be impacted by the factors in H1 outlined above. As a result, Virgin Wines expects revenue for FY23 to be around £63m and full year EBITDA margin to be between 4% and 5%.

Jay Wright said, “We are disappointed with our profitability performance over what has been a difficult trading period, which has been exacerbated by one-off exceptional circumstances. However, our underlying business model remains resilient as the consumer proposition continues to resonate strongly.

“We are pleased to have attracted a significantly increased number of new customers onto our WineBank scheme, our strategic partnership with Saga has started promisingly and our other commercial partnerships continue to perform well.

“Whilst being mindful of the pressures on the business, especially with regards to the high inflationary landscape, we remain confident in our future prospects, driven by the ongoing strength of the brand, our unique offering and loyal customer base.’’

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