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Majestic Wine goes sour after profit warning

Wine retailer takes hit from weak on-trade business and a failed US marketing campaign

Majestic Wine shop in Coquelles near Calais
Majestic's retail business is still doing well

Shares in Majestic Wine PLC (LON:WINE) plunged by a quarter after it blamed weak on-trade business and the failure of a US direct mail campaign for a profit warning.

The stock fell 108.25p to 325.25p after the wine retailer forecast pre-tax earnings before interest in the current financial year to April 2017 to fall short of market expectations of £16.1mln.

It said its core UK wine shop business was trading in line and making progress with an overhaul.

Its Naked Wines business, which funds independent winemakers to produce exclusive wines at favourable prices, was also doing well and on track in the UK and Australia.

But the group said its commercial business, which supplies wine retailers through its stores, had had a tough first half with flat year-on-year sales growth.

The commercial division's pre-tax earnings before interest this financial year could be about £2mln lower than expectations if current trends persist, it said.

"We need to find a better, more profitable approach for our commercial operations as part of the group and as a result an internal review is now underway," Majestic said in a trading update.

The company also said a new direct mail marketing campaign in its Naked Wines US business had been unsuccessful, meaning Naked Wines would fall back into the red this year.

It said other channels were seeing positive results and it would expand them when it was confident that returns were sustainable.

Chief executive Rowan Gormley said: "It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group.

"The turnaround plan in Majestic Retail is progressing well, the key initiatives are on track to be delivered on time and on budget, and preparations for peak Christmas trading are well in hand.

"Naked Wines UK, Australia and the underlying US business continue to trade well, and we have managed to restore Lay and Wheeler to growth.

"Despite these two factors, I am pleased to say we are still on track to resume dividend payments this year and to deliver our goal of £500m sales by 2019. We look forward to giving more details at our Interim results in six weeks time."

 

 

Quick facts: Majestic Wine PLC

Price: 259.5 GBX

AIM:WINE
Market: AIM
Market Cap: £188.99 m
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