Majestic sets out plans to double number of wine outlets

WINE warehouse chain Majestic yesterday unveiled plans to double its number of stores to 330 over the next decade as it posted forecast-beating profits following the demise of rival Oddbins.

The chain - which already has 165 stores in the UK, including 11 in Scotland - reported a 26.6 per cent jump in pre-tax profits to 20.3 million in the year to 28 March on the back of a 10.3 per cent rise in turnover to 257.3m.

Chief executive Steve Lewis said the firm's sales figures were continuing to benefit from the decision in 2009 to reduce the minimum number of bottles it sells in a single transaction from 12 to six.

He added: "We still have the classic Majestic customer - the BMW or Mercedes driver - but we're also seeing a much younger customer because six bottles makes it much more accessible. "

While the company aims to double its footprint, Lewis thinks that the chain may only grow to 20 stores in Scotland due to the geographic spread of the population.

After the chain's latest branches open in Dundee and Livingston in August, Lewis said he would be looking at a further two stores in Edinburgh, to add to its existing three, and a further two in the greater Glasgow area.

In April, Scotland on Sunday revealed that Lewis had ruled out a bid for high street rival Oddbins because its stores did not have the car parks he needed.

Majestic's business model is built around customers being able to park outside its stores so that they can buy in bulk.

First Quench Retailing, owner of rival chains Threshers and Wine Rack, went into administration in 2009 and was followed this year by Oddbins.

Lewis said: "Oddbins' turnover was about 80m, so there's 80m gone walking."

But he stressed that supermarkets - with an 80 per cent share of the UK off-trade wine market compared with Majestic's 3.6 per cent - remained the firm's biggest competitors.

While Majestic's full-year results showed a 2.5 per cent fall in the average spend per transaction to 126, the number of transactions increased by 12.5 per cent to two million on the back of an 8.2 per cent rise in the number of customers to 511,000.

The average price of a bottle of still wine was up from 6.56 to 6.94, with strong growth in sales of Argentine and New Zealand tipples, as well as Italian sparkling wine Prosecco. But French wine still accounted for 34 per cent of the business.

Sales of fine wines, priced 20 per bottle and above, were up 23.7 per cent, leading to profits at Lay & Wheeler - the historic Suffolk-based wine merchant Majestic bought in 2009 - soaring from 23,000 to 701,000.

Keith Bowman, an analyst at stockbroker Hargreaves Lansdown, said profits at Lay & Wheeler may have been boosted by a rise in the number of people buying wine as an investment.

Majestic's share price has risen by about 74 per cent in the past year.The firm, one of the few Aim-quoted companies to pay a dividend, yesterday said it will increase it total shareholder payout by 26.2 per cent to 9.7p.