News Column

Majestic Wine Delivers Uptick In Profit But Sees Flat Growth Ahead

June 16, 2014

Rowena Harris-Doughty

LONDON (Alliance News) - UK wine retailer Majestic Wine PLC Monday reported a slight uptick in profits for its last financial year, supported by revenue growth, but again warned of flat profit growth in the year ahead as it invests heavily in the business.

For the year ended March 31, the company posted a pretax profit of GBP23.8 million, compared with a GBP23.7 million pretax profit the prior year.

Revenue for the year from the 206 Majestic Wine stores increased 1.4% to GBP278.2 million from GBP274.4 million a year earlier, as customer numbers and average spend per transaction increased, although UK like-for-like sales fell by 0.1%, hit by slow sales in January and February and "challenging trading conditions" in the UK retail environment.

Majestic also said that an increase in distribution costs associated with its ongoing roll-out of its store estate, also took a toll on profits.

The company declared a total dividend for the year of 16.0 pence, up from 15.8 pence the prior year.

"Majestic made good operational progress in the last year and despite the difficult trading environment delivered a solid performance," said Chief Executive Steve Lewis in a statement.

Majestic Wines said active customers who made purchases during the year rose 2.9% to 643,000, while the average spend per transaction increased slightly to GBP129 from GBP128 a year earlier, and the average bottle of still wine purchased was GBP7.94, up from GBP7.56.

It said it saw big sales increases of rosÉ from Provence, and of malbec from Argentina, Chile and France. It also said that sales of "fine wine", which is wine priced at GBP20 or more, rose almost 20% in the period.

Shares in the retailer tumbled almost 20% back in March, when the company said that it was expecting flat pretax profit and like-for-like sales for the recent financial year, and said it expects investments in the new year to dent its profits even further.

The wine retailer said that as part of its plans to increase its store footprint to over 300 and expand its e-commerce operations, it will invest in "necessary infrastructure enhancements", including new office space, a larger more efficient distribution facility to handle higher volumes, and establishing its own in-house e-commerce development team.

The group warned that the big investments will hit profits in the short term with flatter profit growth in the current 2015 financial year, and said it expects to return to further profit growth from financial 2016 onwards as its benefits from the investment programme.

Financial "2015 will be a year of increased investment for Majestic to ensure that we have the right infrastructure to maximise on our long-term opportunities for future growth," said Lewis.

Majestic Wine said that online sales rose 5.8% to GBP27.7 million in the year just ended, which now represents 11% of its UK retail sales.

During the year the company opened 13 new stores, slightly less than the prior year. At the end of June, the company said it will be relocating its distribution centre to a modern and larger facility.

Majestic Wine shares were down 1.1% at 428.62 pence in early trading Monday.

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Source: Alliance News

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