Majestic raises glass to big profits increase

Wine merchant Majestic posted strong half year results yesterday, although analysts warned that its sales could be affected by weakening consumer confidence.

Unveiling a 20 per cent rise in half-year profits for the second year in a row, Majestic said revenues rose by 8.7 per cent to 127.8m in the six months to September 26 – 2.7 per cent higher on a like-for-like basis.

But in the period since then, like-for-like sales were down 1.1 per cent after two weeks of disappointing sales amid the economic turbulence in mid-October.

Majestic, which has 176 UK stores, insisted it was still well placed for the Christmas season and pointed out that sales of still wine priced at 20 per bottle or more increased by a fifth during the half year.

The average spend per transaction at its stores also rose by 3 to 125, with the average bottle price of still wine now 7.13 from 6.67 last year.

Majestic has been one of the success stories of the high street in recent years, leading to yesterday’s half-year profits of 8.8m.

It opened new stores in Evesham, Weston-super-Mare, Fleet, Livingston, Hale, Dundee, Worthing and Bury St Edmunds in the half year.

It has also opened stores in Clitheroe, Ripon and Braintree since then.

Further shops are planned for Chesterfield and West Kirby on the Wirral.

The company said it believes it has the potential to expand to at least 330 UK locations. David Jeary, of Investec Securities, said the product and service proposition continued to resonate with customers.

He added: “As one of the few organic growth stories in the UK retail sector, Majestic should continue to remain in favour with investors.”

Analysts at Liberum Capital described the half year results as “solid” but key trading risks remained.

In a note issued yesterday, Liberum said: “Majestic is reliant on the November and December trading period – it accounts for around 30 per cent of revenues and 50 per cent of profits – which provides a risk if consumer sentiment weakens further.

“The company is testing the potential of TV and national press advertising for the first time starting today.

“The excellent long-term structural growth story remains intact but there will be a better entry point over the next six months. We reiterate our hold recommendation.”

The statement added: “Management remain bullish on the long-term potential of the rollout story.

“Majestic’s UK wine market share has increase from 3.7 per cent in August to 3.9 per cent today.

“However, we do not expect a repeat of the strong Christmas sales last year and management state that the economic environment continues to be challenging.”

Liberum Capital praised the company’s consistent earnings track record and said it remained positive on the “long-term structural growth story”.