Shares in Virgin Wines (LON:VINO) plunged after the online wine retailer lowered FY26 guidance due to a ‘challenging consumer market’ and cost pressures. The company also warned it will remain loss-making in FY27 due to the financial impact of investing in a new warehouse.
These downgrades overshadowed an otherwise positive trading update from Virgin Wines. The Norwich-based company continues to outperform the online wine market whilst recruiting new customers and inking lucrative new commercial partnerships.
Are consumers cutting back?
For the year ending 3 July, the direct-to-consumer wine supplier now expects to deliver revenue of £61 million and an adjusted pre-tax loss of £1.5 million. That is slightly worse than the £63.25 million in sales and £1 million loss consensus was calling for.
Virgin Wines pinned the blame for the FY26 downgrade on a dip in UK consumer confidence and discretionary spend, exacerbated by the war in the Middle East. The firm is also having to absorb ‘material increases’ in costs including higher alcohol duty.
Sales trends were positive in the first three quarters of FY26, but trading in Q4 is expected to be marginally behind expectations following a consumer downturn witnessed in recent months.
Canny consolidation
Virgin Wines expects to incur around £700,000 in exceptional costs and increased capex investment of £1.6 million in FY27. This follows the signing of a 10-year lease for a new warehouse facility in Preston to replace the Bolton warehouse.
Cavendish downgraded its FY27 estimates on this news. It now forecasts losses of £900,000 versus its previous estimate of a £300,000 pre-tax profit. The investment in the new warehouse is a positive move to support growth, and the consolidation to Preston should drive savings and efficiencies that will be realised from FY28 onwards.
What did the CEO say?
CEO Jay Wright said: ‘Our execution against the key pillars of our growth strategy is delivering encouraging progress, despite that growth now being slightly slower than our original plan due to external market pressures.
‘We are evidencing that the strategy is working, and we remain focused on taking further market share and continuing to invest in our growth channels.’
Today’s downgrades are disappointing and leave Virgin Wines’ shares down 55% year-to-date. Nevertheless, the company is showing resilience in a difficult market and continues to win significant market share.
Under Wright, the wine specialist is working hard to drive new customers. The launch of the new mobile app in March has seen good engagement, with 13,000 downloads in the first two months alone.
Key commercial partnerships with Moonpig (LON:MOON) and Ocado (LON:OCDO) are delivering double-digit growth, and Virgin Wines has secured partnerships with several UK sports stadiums which should contribute from FY27.
A strong balance sheet gives the company the firepower for further earnings-enhancing buybacks, should prevailing share price weakness persist.
Read the press release here: https://www.virginwinesplc.co.uk/investors/
