Majestic reports vintage year with 14% profit rise

Wine warehouse chain Majestic uncorks annual profits of £23.2m as Britons fork out for fine wines.

by Rebecca Burn-Callander
Last Updated: 19 Feb 2015
Majestic has done it again. The wine retailer has just posted a 14% lift in profit from £20.3m last year to £23.2m to April 2. Like-for-like sales, which strip out the effects of new store openings, are up 2.6%. Total revenues: £280.3m, up 9% on last year.

So, how has Majestic defied the recession to maintain record levels of growth? According to its trading statement, its primary sales lift came from an unusual quarter: the rise in connoisseur drinkers. Sales of fine wine - bottles worth upwards of £20 – have risen 18.5%, and now represent 6.2% of UK store sales. Average spend per transaction is up £2 to £128.

The group is also still reaping the benefits of being one of the last brands standing in this space - Oddbins and First Quench Retailing bit the dust last year. Plus, its ‘warehouse-style’ system, which sets a six-bottle minimum but promises discounts for bulk buys, suits the cash-strapped consumer.

But Majestic also seems to have lucked out across the board. Not even its exposure to the eurozone crisis through Majestic France has dented results. Pre-tax profits from the French business stand at £1.4m.

Despite the profit rise, the markets remain unconvinced. Majestic’s share price is down 2.43% at time of writing. Due perhaps to Majestic chairman Phil Wrigley’s admission that tough trading times lie ahead: ‘it is likely to continue to be difficult,’ he says.

Indeed, growth is already slowing in the first quarter: ‘In the first ten weeks of the new financial year, from 3 April to 11 June 2012, we have achieved UK like for like sales growth of 0.6%,’ he says. And that with the effect of the Diamond Jubilee sales…

Nevertheless, Majestic is sticking to its ambitious plans to increase its number of outlets to 330. The firm opened 16 new stores in the UK last year, bringing the total to 181. But further expansion will put a real strain on cashflow, something which may also be spooking investors.

But for now, let the champagne flow as Majestic celebrates another good year. Let’s just hope the hangover doesn’t hit any time soon.

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