Majestic Wine in the red but eyes return to growth

Majestic Wine swung into the red with half-year losses of £4.4 million, but said it was at a 'tipping point' in its return to profit growth.

Majestic Wine insisted it was at a 'tipping point' on its path to profit growth. Picture: David Parry/Newscast/PA Wire
Majestic Wine insisted it was at a 'tipping point' on its path to profit growth. Picture: David Parry/Newscast/PA Wire

The warehouse wine retailer first issued a profit warning in September after taking a hit from a costly marketing campaign for its Naked Wines business in America and weak sales to business customers.

The £4.4m loss for the six months to 26 September compares with a bottom-line pre-tax profit of £4.3m a year earlier, but Majestic Wine cheered a 10.6 per cent rise in underlying sales growth to £205.6m.

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Chief executive Rowan Gormley sought to reassure investors that the company was heading for growth, adding: “We are at the tipping point.

“From now on we are confident that future sales growth will translate to profit growth, because the step-change in fixed-cost growth is complete (and) we are aiming for, and look like we are achieving, sustainable sales growth.”

He added that the company has reinstated its dividend at 1.5p a share, to be paid on 23 December, and is on track to notch up £500m sales by 2019.

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The company has embarked on a three-year turnaround plan aimed at expanding and retaining its customer base, slowing down branch network expansion and acquiring new customers for Naked Wines. This has seen Majestic spend more money on media, staff training, and its IT and digital marketing teams.

Despite setbacks, the retailer said it intends to stick to plans to invest in growing Naked Wines and transforming its retail business.

Gormley said: “Our plan is working. We said that we would deliver sustainable growth, not by opening more stores, but by investing in better customer service and better customer retention.”

Neil Wilson, a markets analyst at ETX Capital, warned that Majestic needs to get profits on track quickly.

He said: “Chief executive Rowan Gormley may insist that the plan is working… but this massive growth splurge has to turn into sustainable profits soon.”