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Majestic declares itself fighting fit for tough market ahead

Published:  14 June, 2018

Majestic Wine’s full year results to 2 April 2018 reported group sales up 2.3%, driven by underlying sales growth of 11% at Naked Wines, in line with the company’s forecasts.

Strong growth from Naked’s growing Australian and US operations helped underpin growth, while the group as a whole said is has now paid down debt to below target levels.

Profitability at the Majestic retail chain remained flat, with underlying sales growth of 1.9%, put down to improved cost controls being offset by pressure on margins from unfavourable foreign exchange.

Looking ahead, chief group executive Rowan Gormley described a UK market that would “remain tough, possibly even tougher than last year”, and talked of the “robustness” of the current Majestic business model.

The group believes that its “test and learn” investments in its Majestic stores, which has seen shelving introduced to allow ease of shop and free up staff in terms of stocking up time, plus consolidation of Majestic and Naked’s distribution at one centre, place it well to weather an ongoing challenging retail environment.

Majestic’s trading director Richard Weaver highlighted the central strategy of targeting customer acquisition, with a spend by Naked Wines of £14m to this end, and further investments planned for Majestic.

“We have been investing in new customers, and announced our intention to double our rate of investment in customer acquisition, with a spend of £5m to £8m planned to do that for this financial year,” said Weaver.

Majestic Commercial, which hit a rocky patch in recent years against ambitious plans for growth, mainly down to the troubled casual dining sector and fierce competition, will be more of a focus in 2018, with the appointment of new managing director Olivia Fitzgerald in April, who comes from a background of selling into on-trade and has a revitalised sales team in place.

Sales at the company’s third retail estate, Lay and Wheeler, remained flat as Majestic continues to unravel its heavy reliance on the fine wine and en primeur market, while looking to build a more sustainable business with subscription and a fine wine club potentially planned looking ahead.

“We have been in transformation mode for the last two to three years, what Rowan describes as a war mentality for the management team, so while other retailers are restructuring for straitened times, we have already done a lot of the heavy lifting,” said Weaver.

Gormely was similarly bullish about Majestic’s resilience in the face of a challenging environment.

“If the UK is headed for a retail crisis, as some commentators are suggesting, then we are planning for a great crisis,” he said.

“We founded Naked Wines during the financial crisis of 2008 and proved that investing in acquiring customers and generating loyalty through great products and service, will drive profitable growth even in a tough market.”