Majestic Wines sales growth pleases analysts

19 June, 2014

Majestic Wine posted a fractional rise in profits over the past year as surging fine wine sales helped it grow its market share to a record 4.2%.

Pre-tax profits rose 0.3% to £23.9 million and sales were up 1.4% to £278.2 million in the year to March 2014.

But like-for-like sales – which exclude new store openings – were down 0.1% and Majestic blamed slow sales in January and February for the dip.

The retailer refocused its wine portfolio to emphasise classic regions like Burgundy and Bordeaux and was rewarded with fine wine sales – which it defines as bottles above £20 – growing 20% to £18.7 million.

Rosé wine from Provence also hit a chord with Majestic's customers, with sales up 84% over the year, while sales of Argentinian Malbec grew 50%.

Majestic said the number of active customers rose 2.9% to 643,000, the average bottle price grew from £7.56 last year to £7.94 this year and total transaction spend rose £1 to £129.

“This not only demonstrates our ability to hold share in a challenging environment but also the potential for us to continue to grow,” said chairman Phil Wrigley.

Market analysts reacted positively to the news after Majestic delivered an ominous profit warning earlier in the year.

“The headline numbers from Majestic may not set Champagne corks popping but in the context of a highly competitive market they are certainly worthy of a raised glass, or two,” said Neil Saunders, managing director of Conlumino. 

Kate Calvert of Investec added: “[The results] came in £0.1 million better than we expected, after a warning in March following weak January and February sales.

“Reassuringly, management reiterates the same consistent message as last time – financial year 2015 is another year of investment with flattish profit growth expected.

“With the shares having rebounded 12% from 394p lows, we downgrade our recommendation to Add. We believe the longer-term growth prospects remain intact with the current valuation supported by an attractive dividend and strong cash flow.”

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