Majestic Wine Issues Profit Warning

Shares in Majestic Wine plummeted 25% this morning after the retailer warned that its profits for its current financial year are now likely to come in below expectations.

The wine retailer cited challenging trading conditions impacting its commercial division and a failed marketing drive for its Naked Wines brand in the US.

However, the group said that trading at Majestic Retail was on track and it was making good progress with its transformation plan designed to boost sales to £500m by 2019. Naked Wines UK and Australia were also said to be performing well and Lay & Wheeler had returned to growth.

Rowan Gormley, Chief Executive, commented: “It is very disappointing that two isolated factors are distracting from the great progress across the rest of the Group. We have always said that we would adopt a test and learn approach, and be quick to redeploy capital from underperforming areas, which is exactly what we are doing. While, this approach is delivering good results in the other business units the scale of the US market means that even a test can have a material effect on profits.”

He added: “The turnaround plan in Majestic Retail is progressing well, the key initiatives are on track to be delivered on time and on budget, and preparations for peak Christmas trading are well in hand.”

The group said a further update will be given at the time of its interim results on 17 November 2016.

NAM Implications:
  • Where at: The City views the whole company performance, leaving sector management to management…
  • Where headed: Majestic needs to build on its strengths before experimenting with the US, and the underlying business will probably respond
  • Effect on you: More intensive competition in retail and commercial
  • Action: Reassess your competitive difference and anticipate response of your competitors to a re-focused Majestic