Major UK wine retailer, Majestic Wine is anticipated to release details on its rumoured hike in sales following the acquisition of rival firm, Naked Wines last year. Financial analysts at Investec have predicted a rise in revenues at Majestic Wine by as much as 41%, equating to a jump of more than £100m.
Of course, that’s before taxation and deductions; estimates also suggest that profit before tax will in fact be 30% less than the year before, at just £14m. Earnings per share are also forecast to have suffered drops of nearly 40%, representing a share worth of 14.5p.
Founded in 1980 with the establishment of just one local wine warehouse in North London, Majestic Wine has since grown into one of the nation’s biggest wine retailers, opening its 100th store back in 2002. Continually credited at national and international awards ceremonies, the retailer now specialises in beer, champagne, sprits and soft drinks as well as wine.
The slump in profits can be attributed to the costly takeover of Naked Wines in April 2015 which set Majestic Wine back a princely £70m. Alongside improvement and renovation projects across the retailer’s 200-plus stores, the investment has a significant impact on the firm’s black zone.
That said, such schemes of investment are always destined to have a long-term payback rather than boosting profits immediately and analysts were keen to stress that 2016 had been “an encouraging first year under new management” for Majestic Wine. Rowan Gormley, the former boss of Naked Wines, now heads up the firm after Steve Lewis stepping down citing poor performance over the 2014/15 Christmas period.
Since Rowan Gormley’s appointment, there have been various changes at Majestic Wine – not least that he has significantly opened up the firm’s online retail offering. In July 2015, a click-and-collect service was rolled out across all Majestic Wine’s stores to accommodate Naked Wines’ range of products. Under new management, the six-bottle minimum purchase has also been scrapped and replaced with a new pricing strategy hoped to be more intuitive for new and existing customers.
The impact of these fundamental alterations to the business are likely to become clearer in the year ahead though, for now at least, Majestic Wine certainly seems to be something right and it can only be a matter of time before profits start singing the same tune.
