Friday 22 June 2018

Majestic Wine toasts return to profit but warns over tougher trading

The wine warehouse chain said trading had got harder since its year-end.

Majestic Wine has swung to a full-year profit, but warned trading was getting harder as retail woes show no sign of letting up (PA)
Majestic Wine has swung to a full-year profit, but warned trading was getting harder as retail woes show no sign of letting up (PA)

By Holly Williams, Press Association Deputy City Editor

Majestic Wine has swung to a full-year profit, but warned trading was getting harder as retail woes show no sign of letting up.

The wine warehouse chain – which has 210 branches in the UK and two in France – recovered to an annual profit of £8.3 million for the 12 months to April 2, against losses of £1.5 million the previous year.

It said, on an underlying basis, pre-tax profits rose 63% to £17.2 million on revenues 4% higher at £477.7 million.

But chief executive Rowan Gormley said trading had worsened since the year-end.

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Boss Rowan Gormley insists the group can weather the retail storm (Majestic Wine/PA)

He said: “We expect the UK market to remain tough, possibly even tougher than last year.

“Certainly trading since year-end has been harder than the prior year in the UK.”

The group still expects to hit City expectations for 2018-19 and see its retail arm continue to grow sales and profits in spite of the challenging conditions.

It hopes to weather the storm by an ongoing cost-cutting drive, paying down debts and focusing on growing online without opening new stores, while also expanding outside of the UK.

Mr Gormley said: “If the UK is headed for a retail crisis, as some commentators are suggesting, then we are planning for a great crisis.

“We founded Naked Wines during the financial crisis of 2008 and proved that investing in acquiring customers and generating loyalty through great products and service, will drive profitable growth even in a tough market.”

The group is investing heavily in moves to attract new customers, which saw it warn in April over an earnings hit from the drive.

It plans to invest an additional £9 million to £12 million over the 2019 financial year, which will mean taking a £2 million to £3 million hit on adjusted underlying earnings compared with 2018.

Its annual results showed that Majestic Wine warehouse revenues rose 0.6%, or 1.9% higher on a 52-week underlying basis.

Its profit margins were knocked, though, as it sought to maintain “competitive pricing”.

The group also said retail trading worsened towards the end of the year, with a boost from the timing of Easter masking otherwise more difficult conditions.

Its Naked Wines online offering delivered an 8.1% rise in sales – up 11.3% on an underlying basis.

But its commercial division suffered from recent business failures and the loss of customers, with revenues down 7%, while sales across its fine wine specialist arm Lay & Wheeler fell 1.1%.

Tom Stevenson, investment director from Fidelity Personal Investing’s share dealing service, said: “A big contribution from Majestic Wine’s 2015 acquisition of Naked Wines goes some way to justifying the company’s decision to invest heavily in this online proposition.

“Naked Wines’s 11.3% sales growth compares to flat sales in Majestic’s traditional outlets.

“This chimes with the preference for online shopping demonstrated by results earlier this week by Ted Baker, Boohoo and New Look.”

Press Association

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