Thursday 22 November 2018 9:16 am

Glass half empty for retailer Majestic Wine as losses drive shares down

Majestic Wine’s share price took a 14 per cent hit this morning after it posted half-year losses and predicted its full-year results to be “flat at best” against the year before.

The figures

The retailer posted a £200,000 loss for the six months to 1 October, down on a £3.1m profit for the same period last year.

Revenue grew 5.4 per cent from £217.4m to £227.7m, driven by the company’s online retail business Naked Wines, which saw a 14 per cent increase from £66.4m to £75.7m.

Net debt dropped by £5.5m to £20.1m but cash flow plunged to a £7.3m deficit, with basic earnings per share at a 0.1p deficit.

Majestic maintained a 2p dividend.

Why it’s important

Majestic, whose high street business includes Majestic Wine Warehouses and upmarket Lay and Wheeler as well as online-only Naked Wines, has suffered the same fate as much of the retail sector, with lower consumer confidence and an increasing shift to online sales.

While Naked Wines drove the increase in revenue, with online trading accounted for 45 per cent of total group revenue, the other sides of the business struggled against the challenging backdrop with Lay and Wheeler’s revenue shrinking by 9.4 per cent. Majestic blamed a "sluggish" UK market and "tough" high street.

But speaking to City A.M. chief executive Rowan Gormley ruled out store closures even as the business model shifted increasingly to online.

Kate Heseltine, analyst at Edison Investment Research said: “Majestic's interim results demonstrate that Naked Wines continues to be the growth engine for the business.

"Over the medium term, assuming that management can execute against its strategy, we expect the accelerated investment in Naked Wines to provide an attractive opportunity to reduce UK earnings exposure and accelerate online sales growth."

What Majestic said

Chief executive Rowan Gormley told City A.M.: "The last couple of years currency has fallen so prices have had to increase – and British consumers are holding on to their pennies while everyone panics about what Brexit holds for us."

Gormley said there was still "a role for face-to-face retail in wine" because of the importance of being able to compare bottles, but the future would look very different.

"You're going to need very good people in store and good customer data – luckily we have those – and stitch them together into a brilliant customer experience. We're working on that as we speak.

"Soon we'll stop talking about online versus offline and there'll be a post-channel world where customers migrate effortlessly between the two. 

"We now have a business that is almost 45 per cent online and over 20 per cent international with both the option, and intention, to invest further in order to drive returns."