Alongside Naked Wines’ first set of results since investors approved the sale of Majestic Wine in September came the shock revelation that its founder and chief executive Rowan Gormley would be departing the business after Christmas.

GlobalData analyst Thomas Brereton believes investors “will take comfort in Naked having quickly identified a new leader” – its current chief operating officer, Nick Devlin, the man credited with turning around Naked’s US business.

Yet the sudden nature of Gormley’s announcement, combined with Naked’s relatively disappointing numbers, could point to deeper problems. Should investors be taking a glass-half-full approach, or is Naked’s fizz falling flat? 

Reversing the slide

Gormley, who founded Naked in 2008, isn’t exactly exiting at a time when the business is on a high.

During the 26 weeks to September 30, pre-tax losses ballooned to £6.4m from £100,000 year on year. Stripping out the Majestic business, reported EBIT losses widened to £5.7m from £4.7m a year ago.

Gormley lamented Brexit uncertainty in the UK for some of that bottom-line impact and pointed to “the conscious decision to invest more money into customer acquisition” for much of the rest. The amount it spent on the latter jumped 29% to £10.3m during the six-month period. 

“Sales are up, profits are up, investment is up, projections are up. Everything is up”

Rowan Gormley, Naked Wines

The entrepreneur is therefore bullish about the position he will leave Naked in next year. “The business is broadly on-track,” he says, going on to highlight its performance in the US, where sales grew 24% on a reported basis. “Sales are up, profits are up, investment is up, projections are up. Everything is up,” he says.

“If you want an indicator of what the future of the business looks like, those are the KPIs you should examine.”

Investec analyst Ben Hunt agrees with Gormley’s assertion and expects Naked to break even next year off the back of new customer growth.

Others, however, have been left questioning the long-term profitability of the new model. GlobalData’s Brereton says: “Naked needs to answer how sustainable and cash-generative the subscription model really can be in the long term – particularly if it must continue to invest in new winemakers to keep its customers happy.’’

Insight manager at Edge, Chris Elliott, says that while the reported losses would “offer significant concern” on the surface, they have been “incurred at the pursuit of new customers in the US, which has built a strong base” for the new chief executive to build from. 

Refocusing the business almost entirely on the US market represents the second massive gamble that Gormley has taken with Naked in the last few months. Having doubled down on his ambitious strategic bet, Gormley is walking away, leaving his hand to be dealt to his successor instead. 

In the deep end

The man selected to pick up those cards is Devlin. At just 34 years of age, he will become the youngest chief executive of a listed company in the UK when he takes the reins next year. 

Gormley believes Devlin has proven himself in a relatively short time – first as president of Naked Wines in the US, which he joined in 2017, and more recently as chief operating officer of the wider group.

When Devlin joined Naked, the group had just issued a profit warning following a disastrous marketing campaign in the US. In the first half of this financial year, Naked insisted its American division was in profit – although Naked did not put a figure on earnings – and sales soared. 

Gormley insists Devlin is the perfect man to move the business forward since he possesses a different skillset. 

“The next step for Naked is all about expansion and rapid acceleration. Doing that with a business requires patience, structure and strategic thinking – traits that no-one has ever accused me of having,” Gormley says. 

For all of the South African’s self-deprecation, there may well be some truth to the notion that the serial entrepreneur – who previously started Virgin Money under the tutelage of Sir Richard Branson – has taken his business as far as he can. The requirements for running a publicly listed company are, after all, very different from leading an immature, private start-up.

Gormley says he intends to “remain a significant shareholder in Naked and remain available to the company if ever needed”.

While the sentiment may be supportive, one need only look at Superdry as a cautionary tale of the disruption that stake-holding founders with large ideas and little patience can cause.

Whether Gormley really does retire to go on holiday and start “spending his children’s inheritance” as he jokes remains to be seen.

Such luxury will not be afforded to Devlin, who has big shoes to fill at Naked if he is to craft a vintage future.