Virgin Wines has reported that higher alcohol and packaging taxes, along with cautious consumer spending, are set to impact its profits. The online wine retailer's shares fell by more than 10% following the announcement.
Challenging Consumer Environment
The company noted a worsening environment for consumers, with the effects of the war in Iran further pressuring spending. Business costs have also risen, particularly alcohol duty and the extended producer responsibility (EPR) levy. The tax on alcoholic drinks increased in February, and the EPR scheme, introduced last year, taxes companies on packaging bought and disposed of by households.
Virgin Wines, which stocks around 650 wine varieties, said it had tried to mitigate these costs but found it difficult to eliminate them completely amid a worsening consumer environment.
Financial Outlook
The company now expects revenues of about £61 million for the financial year and a pre-tax loss of £1.5 million. Analysts had forecast revenues of £63.3 million and a pre-tax loss of £1 million.
Founded by Sir Richard Branson's Virgin Group before being bought out, Virgin Wines has a customer base of around 140,000, mostly paying subscribers. Chief executive Jay Wright highlighted the company's "exceptionally loyal customer base" and "encouraging progress" on growth plans.
New Warehouse in Preston
As part of its growth strategy, Virgin Wines has signed a lease on a new warehouse in Preston. The company will leave its current warehouse in Bolton by the end of February next year and move all fulfilment work to the Preston site, which is expected to streamline operations and generate cost savings.
