Majestic profits slip on the back of high investment costs

By Gemma McKenna

Published: 17 November, 2014

Majestic Wine's profits have slipped 10.5% to £8.5 million, although group sales are up 2.8% to £133.8 million in the first half of the year.

The group, which operates over 200 stores in the UK, saw its like-for-like sales grow 2.8% and said it increased its market share by 0.1% to 4.3% for the 26 weeks ended September 29, 2014 compared to the previous year.

Steve Lewis Majestic CEO Steve LewisThe company's chief executive said the business was 'progressing to plan' for the 2015 financial year.

Its unaudited accounts show profit before interest and tax declined to £7.7 million, down from £8.4 million in 2013, which it attributed to "previously announced investments in infrastructure, technology and consumer insights to support future growth".

Its fine wine business Lay & Wheeler was particularly hard hit, as profits before interest and tax plummeted by 77% to £127,000 from £575,000 given the poor trading around the weaker Bordeaux 2013 vintage.

Overall the retailer said the number of active customers grew 1.9% to 643,000, with the average spend per transaction up £3 to £130. The price of the average bottle of still wine was up from £7.71 to £8.02.

The group said significant sales increases from wines such as French Picpoul - which grew 127%; Argentinian Malbec which was up 41% and Provence rosé, up 32%, had driven its increased market share.

Online sales grew by 12.3% to £12.9 million, now accounting for 10.8% of its UK retail sales, up from 10.3%.

Sales to business customers increased 4.9% to £26.8 million

Sales of fine wine (priced at £20 per bottle and above) increased by 22.% to £9.0 million

Four new stores opened during the half (2013: 3)

Other developments within the business include opening its new distribution centre in Hemel Hempstead in July - a move which has caused controversy in the supply base after Majestic asked suppliers to financially "support" it.

The group also moved its central support office following the end of the lease term on the previous building and has expanded its commercial sales team.

It has also launched a new craft spirits range in time for Christmas 2014.

Chief executive Steve Lewis, said: "Majestic has a compelling proposition with a differentiated model, strong customer service ethos and a clear strategy to deliver growth. The 2015 financial year is one of investing to put in place the building blocks to deliver future growth and shareholder value and we are progressing to plan."

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