Majestic Wine reports profits down for its first half

Majestic Wine has reported a pre-tax loss of £0.2million for the first half of its financial year due to “sluggish” conditions in its core UK market and continued investments into the business.

Over this period revenue grew 5.4% to £229million, aided by double-digit growth through Naked Wines and good summer sales.

The company said sales for Naked Wines grew from 11.6% for previous six-month stretch to 14% for this period, while growth for Majestic Retail was sustained at 1.9% compared to the same period last year.

Majestic also revealed plans to bolster stocks of wine in the UK to prevent the chances of Brexit supply disruption.

Rowan Gormley, group chief executive, said: “We are doing well in a tough market. We set out a plan at our capital markets day in April 2018 and we are delivering against it. That plan was to accelerate growth by investing in new customers and, so far, the plan is on track.

“In this half we have delivered growth in sales, repeat customer contribution and new customer investment. We have been investing more, and as a result profits are down. “We have continued re-allocating capital to invest more efficiently.”

Over the six months Majestic said English sporting success, good weather and a record grape harvest had led to a 35% growth in English Sparkling volumes through Majestic and 24% growth for English wine through Naked.

Ray O’Connor, wine director at Naked Wines, said: “There is a huge amount of potential out there, and it just needed the right conditions to exceed. Our message is a simple one to our home-grown heroes – let us see just how good the wine is you can make after such a great year. Now is the time to get behind our UK winemakers.”

German wine, and to some extent Austria, also saw a boost with sales up 66% year-to-date at Majestic, while it also pointed to Rosé (a 24% increase in volume sales), North American wine (up 50% in volume) and craft beer, as strong segments.

Majestic Wine said its longer-term expectations remain unchanged “despite short-term headwinds”.

Gormley added: “We are on track to meet our £500m sales target in 2019. The UK market is tough and will continue to be a drag on performance in Retail and Majestic Commercial, whereas we had previously targeted growth, we now expect FY2019 adjusted EBIT across these business units to be flat at best versus FY2018.

“Naked growth will accelerate as we increase our investment but this will impact profit near term: our expected level of investment in FY2019 is now £20m of higher, vs £19m of higher indicated in our Full Year Results in June when we stated we would increase by £5-8m from the £14m invested in FY2018.

“We were planning for tough times and we are investing through tough times because we know that is the route to a more profitable future. As a result, we now have a business that is almost 45% online and over 20% international with both the option, and intention, to invest further in order to drive returns.”

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