Virgin Wines swung to a loss as the company was hit by soaring inflation and teething problems with its new warehouse management system.
The wine retailer posted a pre-tax loss of £700,000 for the year ended 30 June compared to £5.1m last year.
Sales slipped more than 10% for the year to £59m, although the group said this was in line with expectations.
However in the first quarter of its new financial year the business saw a 12% rise in year-over-year sales as conversion and cancellation rates continued to improve.
Gross margins fell to 29.6% from 31.4% last year, due inflationary pressures.
Subscribe to Retail Gazette for free
Sign up here to get the latest news straight into your inbox each morning
Despite the results, the company said its “disciplined approach” to new customer acquisition led to 91.5k new shoppers joining in the period.
The business also saw a record high of members on its premium wine service WineBank.
Virgin Wines also said it predicted double-digit sales growth in its current year, with EBITDA margin of around 4-5% as inflationary pressures start to ease.
Over the past year, the retailer signed strategic partnerships with WHSmith Travel, Saga, Go Outdoors and OnTheMarket which boosted its commercial sales and customer acquisition.
Revenue through this division contributed 11.6% of total sales this financial year, up from 10% the year prior.
Virgin Wines chief executive Jay Wright said: “Looking ahead, the implementation of a number of exciting new strategic initiatives following the completion of our business review earlier in the year will support our resilience, enhancing our ability to cater to a wider range of customers.
“More broadly, we remain confident in our longer-term prospects given the strength of the customer proposition and our proven business model. Our continued focus on profit, generating cash and driving efficiencies also positions us uniquely within the sector.”