Majestic remains envy of many with right mix

26 January, 2007

Majestic has kept its shareholders smiling with another year of record profits.

The mixed-case specialist's full-year profits were up 9.8 per cent to £14.5 million, from total sales of £172.2 million.

Interim results to Sept 26 brought further good news with profits up 17 per cent to £6.5 million . Sales g rew by

£7.6 million to £88.3 million.

Majestic's average bottle price and spend per customer each visit are the envy of many of its competitors - £5.66 and £121 respectively. The average bottle price in the UK off-trade is £4.03, according to ACNielsen figures.

So how has Majestic managed to maintain its enviable position?

For one, it has continued to take a cautious approach to expansion, opening eight warehouses since last January. Majestic needs larger sites than most to accommodate its by-the-case offer, and knows it has a strong point of difference by providing customer parking. It has not been tempted to dilute this offer by moving into other retail formats. Chief executive Tim How says Majestic plans to open another 10 warehouses in 2007.

Openings are planned for Dulwich in London, Sonning in Berkshire, Aberdeen and Colchester , Essex, in the first half of 2007, while the St Albans warehouse will be re-sited. "Several other new stores are at advanced stages of negotiation. We are pleased with the sales performance at all new stores opened to date," sa ys chairman Simon Burke in the company's ­November report. Chief executive Tim How says the main challenge for Majestic in 2007 will be "securing enough good new sites".

Majestic also puts an emphasis on having knowledgeable staff, which it puts through WSET wine and spirit exams . Daily tastings and free delivery are also customer-pleas ers.

Keeping things fresh and interesting is a central part of Majestic's philosophy. Last year it introduced a Burgundy en primeur offer for the first time, featuring top Côte d'Or wines from Bouchard Père et Fils and Louis Latour. Buyers also sourced a parcel of Bordeaux from Switzerland with a retail value of £400,000.

Wines from the Loire, Spain, New Zealand, Chile and Argentina sold well last year, with traditional favourites from Bordeaux, Burgundy and Champagne helping to boost festive sales by 4.4 per cent in the nine weeks to Jan 1. But How says Australian wine has fallen out of favour as drinkers move towards fresher styles.

Air-conditioned fine wine sections for £20 -plus bottles have been created in 20 shops in the estate, and this has certainly contributed to Majestic's bottom line. Sales of these top-end wines increased by 33 per cent during the six months to September.

Majestic's online business has also made a significant contribution to its overall success. Web sales grew by 43 per cent to November, and - including Christmas business - now represent 7 per cent of all sales.

Its Gift Solutions service, launched in 2005, has no doubt helped boost online orders, offering a choice of one, two, three or six bottle s to be delivered by courier across the UK.

The company says it nurtures customers to encourage repeat business - Majestic has 130,000 addresses on its database and keeps in regular contact by e-mail with details of offers.

Web business seems set to keep growing. "We expect online sales to represent around 8.5 per cent of total sales by the end of 2007, rising to 10 per cent by the end of 2008," says How.

The only blip on Majestic's horizon has been a decline in sales at its French warehouses - down 8.3 per cent in the year to November 2006 - which the company says reflects the general downturn in cross-Channel shopping.

However, this is a small issue when measured against the strong overall performance of the company - a success story which looks set to continue over the next 12 months.

Majestic Wine Warehouses

Majestic House, Otterspool Way,

Watford, Herts WD25 8WW

01923 298200

Current size of estate: 133 shops in the UK (another four to open in early 2007),

Wine & Beer World shops in Calais, Coquelles and Cherbourg

Key personnel: chairman, Simon Burke; chief executive, Tim How; chief ­operating officer, Steve Lewis; buying director, Justin Apthorp; finance director, Nigel Alldritt

Year founded: 1980

Number of employees: 816

Turnover: £172.2 million to March 27 2006

Most recent pre-tax profits: £14.5 million to March 27 2006.

Developments in 2006

Full-year profits to March 27 up 9.8 per cent to £14.5 million

Half-year profits to Sept 26 increased by 17 per cent to £6.5 million

Fine wine displays expanded to 20 warehouses

Average bottle price up to £5.66.

Challenges for 2007

Securing suitable sites for expansion

Decline of French warehouses as cross-Channel shopping nosedives

Growing online business as ­competitors develop theirs.

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