Majestic Wine toasts sales growth
- 17 November 2016
- From the section Business
Majestic Wine said it was on track for higher growth as it fell into the red for the six months to September.
The retailer posted a pre-tax loss of £4.4m, compared with a profit of £4.5m for the same period last year, and said it had been focusing on boosting sales rather than the bottom line.
Majestic said the loss was largely due to a failed marketing campaign for its Naked Wine business.
Like-for-like sales rose 5.7% in the 26-week period.
Shares jumped 3.9% to 313.5p in morning trading in London.
The firm reiterated its pledge to hit annual sales of £500m by 2019.
Its Naked Wine business matches customers, called Angels, with small wine producers. It had expected said that a US test mail shot had indicated a wider mailout would boost sales strongly, but this had not been borne out.
Rowan Gormley, Majestic chief executive, said that challenges remained, but added: "From now on we are confident that future sales growth will translate to profit growth. The step change in fixed costs is complete."
Majestic Wine has 210 outlets in the UK and two in France. Its Naked Wines business operates in the UK, the US and Australia.
Analysis: Dominic O'Connell, Today business presenter
If you think the big grocers have it tough in competition with the internet, spare a thought for Majestic Wines, which flourished in the yuppie years but now faces a struggle against not only online rivals but the combined might of the big supermarket chains.
Last year it parted company with chief executive Steve Lewis, and replaced him with the boss of one of its upstart internet rivals - Rowan Gormley. At the same time it bought his business, Naked Wines.
Phil Wrigley, the former boss of clothing chain New Look who now chairs Majestic, was taking a bet that Mr Gormley would be able to shake Majestic out of its 1980s rut.
Today's interim results show that Mr Gormley has made a start, with underlying sales up nearly 11%. Profits, however, are well down, to just £100,000 on a turnover of £206m, on sales up from £182m to £206m.
Once an adjustment for the Naked Wines deal is taken into account, the business reported a pre-tax loss of £4.4m. Mr Gormley's task now is to prove his claim the business is at a "tipping point" that will turn those increased sales into bigger profits.