Majestic on the money

Published: 23 July, 2008

Shares in Majestic Wine rose marginally as soon as its results for the year to March 27 were announced, reflecting the market's relief that the figures were almost exactly what brokers had predicted. Last week, some had expressed fears that the pace of Majestic's long unbroken run of record profitability would be slowed.

Pre-tax profits at Britain's largest wine warehouse chain rose by 9.8% to 14.5m while operating profit increased by 10.7% to 172.2m. Total sales were up 6%, reflecting the six new stores opened in the financial year. Like-for-like sales (which excludes new outlets) rose by 3.8%.

According to Tim How, managing director of Majestic Wine, the figures would have been better were it not for the fact that the Easter promotions fell into April this year rather than March as previously. We were running at like-for-like growth of above 5%, although we did have an unusally quiet January and Febuary as well.'

He added that like-for-like growth in the past 11 weeks has been running at 8.6%'.

As well as the impact of the Easter promotions falling in this period, How said that the World Cup and the recent warm weather had also had been beneficial to sales.

One of the key figures analysts look for in Majestic's results is the average cost of the bottle it sells. This rose from 5.52 to 5.59, partially reflecting duty increases, but the average transaction has also gone up by 5 to 118. How attributed this rise to very good results on Champagne, especially in central London, and a growth in sales of our fine wine.

We now have 15 fine wine sections, with 10 more planned to be introduced in the next financial year.'

Overall sales of fine wines grew by 30% and bottles price at above 20 now represent 3.1% of Majestic's market.

Countries showing strong growth were New Zealand, Chile and Spain, with Burgundy also performing well, despite France being slightly down'.

That the company is continuing to move in the right direction is shown by the fact that an additional 20,000 customers who made actual purchases were added to its database, while internet sales shot up by 38% to 5.7% of total UK sales. I can't see the growth in internet shopping slowing, I can see us doing 10% of our business online in the next three years.'

On continued expansion, he said: Majestic is in a strong position to continue to expand market share, with good potential for 200 UK locations.' The group has 127 outlets at present. Since the start of Majestic's financial year, the Tunbridge Wells and Cardiff stores have been resited. Later this month two new outlets, at Bicester, Oxfordshire, and East Molesey, Surrey, will be opened.

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