Majestic Wine has outlined plans to build up its business around its fast-growing online brand which will result in the Majestic name disappearing and some of its stores being closed.
The specialist wine retailer said its plans, due to be revealed fully in June, would seek to build its online and international focus through Naked Wines, the delivery business it bought in 2015. It believes it can accelerate its growth by transforming the group into one model with one management team, centred around the Naked brand.
Majestic plans to fund the ‘Transformation Plan’ by releasing capital from its retail and commercial arms through a combination of actions. These include migrating customers and stores to the Naked brand, asset sales, and the closure of some of its 200 outlets.
The company, whose core retail chain has struggled for growth amid stiff supermarket and online competition, did not specify how many stores it would close but said it hoped job losses would be kept to a minimum by migration into Naked.
However, it did warn that the strategy could result in “substantial cash restructuring charges” from its 2019/20 financial year onwards.
While its expectations for sales and profits this year were on track, Majestic’s management stated that Naked’s business model was the main driver of growth, accounting for a third of group sales. Its sales are expected to hit £175m this year, double the total achieved in 2015. As well as the UK, Naked sells wines in the US and Australia. It has also built a portfolio of 200 winemakers, producing 1,000 wines in 18 countries.
Rowan Gormley, Group Chief Executive, commented: “It is clear that Naked Wines has the potential for strong sustainable growth, and we will deliver the best results for our shareholders, customers, people and suppliers by focusing all our energies on delivering that potential.
“We also believe that a transformed Majestic business does have the potential to be a long-term winner, but that we risk not maximising the potential of Naked if we try to do both.
“Therefore we have taken a decision to focus all of our capital and energies into delivering the long-term potential of Naked, and releasing value from Majestic. Our plans for doing this are well advanced, and we look forward to sharing the final details in June.”
