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Virgin Wines has returned to profit following a widespread cost-cutting mission across the business.
While group revenues remained flat at £59m, pre-tax profits moved from a £700k loss in FY23 to a £1.7m profit in the year ended 28 June 2024.
The business said operational efficiencies had boosted margins with a cost-cutting programme delivering £1.4m in annual savings.
Fulfilment costs also fell two percentage points to 12% of revenue despite a 10% increase in the national living wage, while a new warehouse system implemented in late 2022 has resulted in a 50% reduction in costs associated with customer returns and refunds.
“Despite a tough consumer backdrop, we are pleased to have increased new customer conversion rates, lowered cancellation rates and delivered a competitive cost per acquisition,” said Jay Wright, CEO.
“We have also introduced several strategic initiatives to enhance our growth and are particularly encouraged by the initial results of our Warehouse Wines offering as well as the Vineyard Collection and Five O’clock Somewhere Wine Club.”
The new Warehouse Wines exclusively sells wine for under £10 and now has over 8k customers. Virgin said it expects the business to “significantly contribute” to the group’s future growth.
Virgin also launched a strategic partnership with Ocado Retail earlier this month that will give Ocado customers access to an exclusive selection of 50 wines from the Virgin Wines portfolio.
A focus on commercial partnerships delivered 5% year-on-year revenue growth from B2B activity last year. This included a partnership with Moonpig and an extension with rail partners including LNER, Avanti and GWR.
Virgin earns most of its revenue through its flagship WineBank service which now has over 126k members. The total amount of customer money held by the business hit a record level of over £9m pre-Christmas 2023 and finished the financial year at a seasonal high of over £8m.
Trading through the past four months remained in line with market expectations.
Morning update
Tesco announced the third stage of its £1bn share buyback programme this morning that will see it purchase £400m of its own shares by April next year.
This latest buyback programme began in April and has seen Britain’s biggest supermarket repurchase £600m of its shares so far this year.
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