Member Article

Majestic Wine launches ‘three-year transformation’ plan as profits fall

Majestic Wine has unveiled new strategy to deliver ‘sustainable, volume led earnings growth and improved return on capital’ by 2019.

The Watford-based wine retailer is targeting over £500m sales by 2019 as it focuses on disciplined investment to generate returns on investment, including that of the acquisition of Naked Wines at the start of the financial year.

For the 26 weeks ending September 2015, Majestic Wine saw pre-tax profit plummeted almost 50 per cent from £8.5m to £4.3m. The attributed this fall to ‘non-cash charges relating to the Naked Wines acquisition, interest costs and exceptional items’.

The group’s sales increase 36 per cent, while adjusted EBIT was up 12 per cent.

As part of its three-year transformation plan, the retailer has announced a change of emphasis from opening new stores to new customer recruitment to drive higher returns from the current level of investment spend. As a result, the total UK store target was reduced from 330 to 230, currently 211.

Rowan Gormley, Majestic’s CEO, commented: “Six months into my new job it is clear to me that we have a solid core business at Majestic, and two great growth engines in Naked and our Commercial business. We have a clear plan, which will require investment and take 3 years to complete, but will also deliver a better business that can create sustained growth in shareholder value.

“Fortunately, the Board acted decisively and quickly when it became clear that a change of direction was required, so our core competitive strengths are intact and provide a sound foundation to work from.

“As a result, profit for the current year is expected to be impacted by the increased investment derived from our successful test period after which we expect to see sustainable growth as the anticipated returns from our initiatives are realised.”

This was posted in Bdaily's Members' News section by Ellen Forster .