Virgin Wines has said it is grappling with higher alcohol and packaging taxes along with consumers tightening their belts, which is set to knock profits.
Shares in the online wine retailer dropped by more than a 10th following the update to investors.
Virgin Wines said it was operating in a worsening environment for consumers, with the effects of the war in Iran putting further pressure on people’s appetite to spend.
It also highlighted an increase in business costs, particularly alcohol duty and the extended producer responsibility (EPR) levy.
The tax charged on alcoholic drinks increased in February, and the EPR scheme, introduced last year, levies a tax on any company that produces packaging bought and disposed of by households.
Virgin Wines, which stocks around 650 types, said it had tried to mitigate the costs but it had “proved difficult to eliminate these completely when partnered with a worsening consumer environment”.
The company is now expecting to generate revenues of around £61 million for the financial year and a pre-tax loss of £1.5 million. Analysts had been guiding towards revenues of £63.3 million and a pre-tax loss of £1 million.
The company was established by Sir Richard Branson’s Virgin Group before being bought out, and now has a customer base of around 140,000, the majority of which are paying subscribers.
Chief executive Jay Wright said the company has an “exceptionally loyal customer base” and that it was making “encouraging progress” on plans for growth.
This includes signing the lease on a new warehouse in Preston it helps will help with the growth plans.
It is set to leave its current warehouse in Bolton by the end of February next year and move all fulfilment work to the Preston site, which the firm said will help streamline its operations and lead to cost-savings.
