Business

Majestic Wine shares dive on profit warning

Majestic Wine shop Image copyright Majestic wine

Shares in Majestic Wine have sunk by nearly a quarter after it warned its profits would be lower than expected.

The wine retailer said it had been hit by the costs of a failed marketing campaign for its Naked Wines business in the US.

The company has also suffered from a poor performance by its commercial division, which sells wines to pubs and restaurants.

Majestic's share price closed the day down 23.88% at 330p.

"It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group," said chief executive Rowan Gormley.

He added that Majestic was still "on track" to resume paying dividends this year, and reach sales of £500m by 2019.

Majestic Wine currently has 210 outlets in the UK and two in France. Its Naked Wines business operates in the UK, the US and Australia.

The company said that a direct mail campaign to attract more customers to Naked Wines in the US had not worked. The costs of this means the business will record a "small loss" in the current financial year after making a profit last year.

Majestic said its commercial division failed to grow sales in the first half of the year, and profit margins fell. It has now launched an internal review into the unit.

Analysts at Liberum downgraded their forecasts for the Majestic, but said the problems it faced "are more short term in nature and do not reflect anything more sinister".

"The core Majestic Retail business is on track and on target and Naked Wines in the UK and Australia is growing according to plan."

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