A small downward revision in profit expectations was not enough to dampen the festive cheer for Majestic Wine, as the alcohol retailer announced sales during the vital Christmas period up year on year.
Shares jumped by more than five per cent on Tuesday morning before paring to just below a three per cent gain at the time of publication.
Profits before tax were expected to be £11.3m for the full year 2017, down from the expectation in November of between £11.9m and £12.4m.
Revenue expectations for 2017 have been adjusted slightly above the November guidance, at £445.2m.
Sales grew by 15.3 per cent year on year for the 10 weeks up to 2 January (an underlying 12.4 per cent growth rate, which takes account of buying wine en primeur, before it is bottled).
Like-for-like sales were up 7.5 per cent for the retailer’s biggest Christmas ever, an increase from last year’s 7.3 per cent growth.
Sales of Naked Wines grew by 29.9 per cent, and its Lay & Wheeler brand sales grew by 62.3 per cent due to a new management team – but Majestic Commercial sales fell by 0.8 per cent.
However, discounting in an effort to fight off cheap supermarkets – as well as the falling pound – led to gross margin falling by one percentage point.
Why it's interesting
Majestic has had a tough year, with a steep fall after the EU referendum and an even steeper one after warning on profits in September as a US marketing campaign fizzled out.
However, increasing sales during the vital Christmas period could signal that customer demand will stay strong – reflecting measures of consumer spending in the UK that have surprised most analysts on the upside.
Majestic is on the front line of Brexit-inspired sterling devaluation – and will be for a long time to come as long as Brits drink French wines rather than those grown on our rather colder shores.
However, the business has yet to see any change in consumer behaviour despite the slight impact on prices.
Margins could shrink further as currency hedges start to reflect the weaker pound, but so far it appears to be weathering the storm.
What Majestic said
Rowan Gormley, Majestic’s chief executive, said: "I don't think we've seen anything happen in the market that is game-changing."
"Our transformation plan is working and we remain on track to achieve our £500m sales goal. We said that we would be better prepared for Christmas than ever – and the numbers show that we did what we said we would do."
"At this stage we are not predicting a change to long-term margin expectations, but we need to retain flexibility to compete in a competitive market."
Strong sales during the season of good will make up for a heavy bout of discounting at Majestic Wine. No sore heads this morning.