Majestic Wine profits fall after group makes big investments for the future with Naked Wines aquisition

 
Billy Ehrenberg
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In the last year, Majestic has looked to make a bigger splash online (Source: Getty)

Majestic Wine’s profits fell 12.2 per cent during 2015, after the company spent big in acquiring rival Naked Wines.

Chief executive Rowan Gormley admitted the company will suffer a short-term hit to its profit as it looked to invest in the short term.

The figures

Adjusted profit before tax fell to £20.9m in the 52 weeks ended 30 March, from £23.8m during the same period last year. The figure was hit by the one-off costs of acquiring Naked Wines. Meanwhile, revenues rose 2.3 per cent to £284m.

Group profit before tax fell to £18.4m for the full year, down from £23.8m last year.

This reflected a 0.3 percentage point drop in gross profit margin, which fell to 22.7 per cent, plus a 5.7 per cent increase in distribution costs and £1.8m spent in acquisition costs over the purchase of Naked wines.

Like for like sales rose 1.9 per cent after falling 0.1 per cent in the previous financial year.

Why it’s interesting

Majestic’s acquisition of Naked Wines brought the latter’s founder, Rowan Gormley, into the role of chief executive at the newly formed company. Gormley has been in the post for 10 weeks, and is embarking on a strategic review of the business.

The review’s conclusions are expected in the company’s six-month results, to be published after the period ends on 28 September.

In the last year, Majestic has looked to make a bigger splash online – and its internet sales rose 12.4 per cent in the last 12 months. This online push will be bolstered by the acquisition of Naked, an online wine retailer. The two will fall under the umbrella of the Majestic Wine group.

What Majestic said

Gormley said:

I have only been group chief executive for 10 weeks but it is clear to me that the enlarged Majestic Group has excellent future prospects. Majestic Wine has many unique competitive advantages… When combined with Naked Wine's digital strengths, and both businesses ability to source exclusive and exciting wines for their customers, we are uniquely placed to build a fast growing international leading wine specialist.

While my review of the business is ongoing it is obvious that we need to make investments to reinvigorate Majestic Wine. These investments will initially suppress profit in the short term but I am confident we can rebuild momentum in this excellent business.

At the same time we aim to maintain the international growth trajectory of Naked Wine and crystallise the benefits of having the two businesses in the same Group. I am confident that we will create significant value for our shareholders over the medium term.

In short

The results of the strategic review will make interesting reading in the Autumn, and the results of the renewed online focus will be keenly watched too. With 213 stores across the country, the pivot to online will make the group strong on two fronts.

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