Naked Wines shares were buoyed this week by signs of a bottom line turnaround, despite slipping to a first-half loss.

The business unveiled plans in October to reduce costs, improve profits and boost cash generation, after struggling this year in the face of inflation, falling consumer confidence and a slowdown from pandemic-driven highs.

Sales in the six months to 26 September rose 4% to £165.8m, helped by weakness in the pound. Sales on a constant currency level were down 3%.

More importantly, the company claimed its ‘pivot to profit’ plan was already showing results, with a record adjusted EBIT of £4.6m in the half – almost four times prior year levels.

Naked plumped up margins in the US by rolling out pricing changes, kicking off a plan to reduce inventory levels over the next 18 months, restructuring staffing levels to remove 32 roles, and reducing marketing costs by 44% year on year.

Despite the big marketing cut, Naked reported only a 8% drop in new customer sales in the half.

However, Naked fell to a pre-tax loss of £215k, compared with a £1.3m profit a year ago, after taking a £7.9m hit from writing down the value of its inventory and other finance costs. The company also warned its sales trajectory would reduce in the short term, with full-year revenue guidance of £340m to £360m.

Jefferies noted: “The early signs of Naked’s change in customer acquisition strategy are demonstrating the fundamental strengths of the model.”

Liberum added: “The group will still consume cash as we move through the second half but the annualisation of the new plan should support a strong outturn in its 2024 financial year, for both profits and cash.”

Naked ended the day jumping 11.3% back to 108.3p, though shares were still well down on the start of 2022, when they were over 600p.

Elsewhere, travel food retail specialist SSP Group bounced back from Covid lows to return to profit, as sales rebounded by more than 160%. Although Covid-19 continued to have a “significant” impact on trading performance during the 52 weeks to 30 September, revenue in major markets continued to recover well with total sales up 162% to £2.2bn – 78% of pre-Covid levels and 90% in the second half.

The year’s underlying operating profit bounced back to £31.7m, compared with an equivalent loss of £323.3m in 2021, driven by its sales rebound and management of inflationary cost pressures through productivity and pricing initiatives.

Shore Capital said the numbers “show strong resilience and demonstrate continued momentum the global travel market recovery”.

It stated: “SSP is an exceptionally high-quality company laid low through no fault of its own by the pandemic, now hopefully in the rear-view mirror. We see the results as highly supportive of the recovery profile, with the building pipeline evidence of the long-term growth potential.”

SSP Group rose 3.2% to 223.3p on the strong recovery momentum, having bounced back from two-year lows of 181.5p in October.

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