Majestic Wine toasts new Scotland store success

A SUCCESSFUL store launch in Scotland helped Majestic Wine keep profits stable even as it retreats from wholesale selling in favour of growing its retail estate.

Chief executive Steve Lewis said Majestic's Scottish sales had held up well. Picture: Contributed

The group grew its pre-tax profits by £500,000 to £23.7 million in the year to 30 April, despite a 2.1 per cent drop in revenues, to £274.4m.

Last year the company said it would run down its lower-margin wholesaling operations as it is rapidly becoming able to sell all the wine it imports itself. Like-for-like sales in UK retail stores were up 1 per cent.

Chief executive Steve Lewis said the firm had about eight years of solid organic growth ahead, after opening 16 shops in each of the past two years.

Of those opened last year, he singled out Edinburgh’s Queensferry Road as being “one of the most-successful store launches we have ever known”.

It now has 193 shops and Lewis believes it can support about 330 outlets around the UK.

He said: “We are still looking for more sites in Scotland.

“Normally the Scottish market suffers in recessionary times but this time has held up very well. I think that’s partly through self help – all the work we’ve done in building our data-base and engaging with our customers in social media and holding tastings both in stores and for groups and societies.”

He added: “Increasingly social media is really working. A couple of years ago it was nice to have, but now you can really see the difference in terms of sales and customer loyalty.”

Web-based sales are another area the group is targeting for growth. Online sales increased 14.7 per cent compared to the previous year and now represent 11.1 per cent of Majestic’s UK retail revenues.

The two other key areas Majestic is focusing on are commercial sales and fine wines.

Lewis said that the commercial business – which supplies catering firms, restaurants and gastro pubs – enjoyed margins not far below those of the retail operations and grew sales by 13.6 per cent.

He said that in Scotland, business from people planning a wedding had been a key driver of sales, especially in the north.

Meanwhile sales of fine wine – priced at £20 per bottle and above – increased by 9.4 per cent and now represents 6.5 per cent of UK store sales.

Lewis said people were increasingly treating themselves to more expensive wine to drink at home instead of eating out, and the company has been training its staff to “hand sell” fine wines.

The average bottle of still wine purchased at Majestic is now £7.56, up from £7.34 a year ago, although the average spend per transaction remained the same at £128.

The biggest seller is currently sauvignon blanc from New Zealand, while Argentine malbec is also proving popular.

The firm proposed a final dividend of 11.8p per share, bringing the total dividend to 15.8p, up from 15.6p the year before. Majestic is one of the few Aim-quoted stocks to pay a divi.

Wayne Brown, an analyst at Canaccord Genuity, said Majestic was trading in line with expectation and rated the shares a “buy”, noting they had underperformed the wider retail sector.