Naked Wines has seen its shares tank this week after shocking the market with suggestions it would need to shift strategy to deal with falling consumer demand and rising costs.

In an unscheduled business update, the group said it was reviewing potential operational and financial plans for the next 18 months and would give more details alongside a first-half trading update in October.

It separately announced that non-executive director Pratham Ravi – an analyst at Punch Card Capital, one of Naked’s largest shareholders – had resigned from the board less than three weeks after joining on 25 August.

“The group’s focus is on developing plans demonstrating increased profitability, cost restraint and improved payback,” Naked said in its short update. It also said there were “active discussions” to address its credit facility to reflect any revised plan, as it sought to reassure investors it remained in compliance with its financial covenants in the first quarter and had headroom to meet its second quarter tests.

Shares slumped 37.7% to just 90.4p in the aftermath on Wednesday – easily its lowest level since Majestic Wine bought Naked in 2015.

Liberum commented: “The business update talks about cost cutting, focusing on profitability, which we interpret as a change in strategy and not being so aggressive on growth. This could imply a smaller business in the future and reining in ambitions, which makes sense considering how poor KPIs are.”

The broker added that its weak balance sheet and question marks around liquidity “could suggest the trading update on 17 October could be rather negative”.

Jefferies concluded from the “cryptic statement” that ongoing pressures on order profitability from inflation and distribution have meant returns on new customer investment have dropped below target levels. “Given the increasingly challenging global consumer macro backdrop, management looks to have made the decision that a more radical pivot towards profitability is the best course of action for the next phase,” it said.

The share price movement this week marks a dramatic reversal in fortune for Naked Wines, which had experienced a boom during the pandemic. The stock has plummeted more than 85% so far in 2022.

In June, Naked spooked investors as it warned of tumbling new customers numbers and difficulties hanging on to customers as consumer confidence was hit by the cost of living crisis.

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