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Majestic Wine sales soar, but profits slide

Published:  20 June, 2016

Majestic's financial year 2016 results show that while reported sales increased 41.3% to £402.1m, adjusted profits before taxes declined 30.3% to £15.0m for the same period as the company invests in a three-year transformational plan.

The figures full year results are for the year ending 28 March 2016.

"We have taken the first step on a long journey - it was a good start but it is just the first step. Early signs are that the plan is starting to work. Strong sales figures reflect the hard work being done on the ground by the whole team," said chief executive Rowan Gormley.

The slide in adjusted profits were costs related to the acquisition the Naked Wine business and investments made in the course of the retail business.

"There were about £11.5m of costs related to the Naked Wines acquisitions of which a large portion were paid out in shares which we had to account for. Additionally, there were associated costs that were related to new stores that needed to paid out as well. Although we have capped the expansion on the number of new stores moving forwarded, there were some residual costs," explained James Crawford, the chief executive officer for Majestic Wines PLC.

While profits did take a hit due to the acquisition costs, the level of investments in the business for FY2016 would have still eroded the figures.

"There is no skirting the issue that profits were down, but the level of investments in the business that we have made will drive sales and we will see the return on these costs in the coming years," said Crawford.

Sales were driven by an improvement in like-for-like sales in the retail business, which were up 4.8%, continued growth in Naked Wines business, which was up 27.3% and the commercial business growing sales by 7.9%.

According to John Colley, the managing director of Majestic Retail, the sales growth for Majestic was driven by a healthy Christmas trading period. "We had a good Christmas and the trading went reasonably well and that is a massive part of our trading year," said Colley.

Luke Jecks, the managing director of Naked Wines, said that the growth was being driven by the US market. He said: "We have had growth in all three markets. In the UK we saw year-on-year growth of 13.5%. In the US we had 49% growth in sales and in Australia we had 5% growth. We really spent the year recalibrating the recruitment part of the model we have and the US is really the growth engine at the moment."

The re-calibration of the recruitment model included a change in price points for the wines on offer and focusing on higher quality customers that were more engaged with the Naked Wines community.

For the commercial side of the business, led by Ben Nicholl, the past year was one of transition - but one that also helped drive growth.

"We have had above-market growth, but the year was one of transition where we have been investing in infrastructure."

Gormley's three-year transformational plan involves three stages with the aim ultimately having sales reach £500m by 2019.

"The management re-organistation is now complete, I am delighted with the teams we have in place across the Group," said Gormley.