Majestic Wine needs a lie-in and some paracetamol after hooking up with Naked Wines this year; but its share price looks healthy

 
Helen Cahill
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The wine seller is a little hungover (Source: Getty)

Majestic Wines announced a drop in pre-tax profits this morning, following its purchase of Naked Wines last April.

Despite this, the wine merchant's share price climbed by 5.37 per cent in morning trading.

The figures

Majestic Retail posted a 41.3 per cent rise in sales for the year ending 28 March, up from £284.5m last year to £402.1m this year.

However, pre-tax profiets were hit by the acquisition of Naked Wines, falling by 74.5 per cent, down from £18.4m last year to £4.7m this year.

Why it's interesting

The wine retailer purchased the crowdfunding platform Naked Wines last year and the acquisition has had an impact on profits. The company said today that, excluding the buy-out and other one-off expenses, profits would have been £15m.

Rowan Gormley, the former chief executive of Naked Wines who took to the helm of Majestic last year, admitted "trading conditions remain tough in the UK especially".

"We expect them to stay that way," he added.

Gormley also told City A.M. that he believed Majestic had unleashed the entrepreneurial spirit of the mass booze retailer, particularly by pursuing a back-to-basics plan to empower store managers. This has included allowing store managers to choose their own staff and other streamlining projects including ditching its policy of a six bottle minimum purchase.

The firm is not planning any further acquisitions, Gormley added, though will be undertaking two "infrastructure" projects within the company to upgrade its IT systems and rebuild its supply chain to make store "the right wine is in the right store on the right day".

Gormley said the company is on track to achieve its target of £500m sales by 2019.

Analysts at Liberium retained a buy rating for the company, saying: "The Majestic Wine business has seen positive like-for-like sales growth for the first time in four years, and Naked Wines continues to be the key engine of sales growth.

"The group is increasingly well positioned in all areas of the business."

What Majestic Wine said

Rowan Gormley, chief executive, said:

We have taken the first step on a long journey - it was a good start but it is just the first step.

Early signs are that the plan is starting to work. Strong sales figures reflect the hard work being done on the ground by the whole team.

The management re-organisation is now complete, I am delighted with the teams we have in place across the group.

At Naked Wines we had a belter year - breaking through the £100m sales barrier and delivering a maiden profit.

In short

The wine merchant is suffering a slight hangover, but may be back to good health soon.

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