Majestic issues profit warning
Majestic Wine has warned on profit following lower than expected sales growth at its Majestic Commercial business and higher marketing costs at its Naked Wines online crowd-funding platform.
In its annual results for the year ended 31 March 2016, Majestic said its commercial business was not growing sales at the level to which it aspired and that necessary investment in new business development and its store network had reduced profit growth to just 1% for the year.
In a trading update issued today, the company said the first half of the current financial year has proved to be even more challenging with the result that commercial sales growth has been flat year-on-year with the gross margin percentage achieved on those sales down by around 200 basis points. Assuming that these trends persist through to the end of this financial year, the company said the commercial division’s EBIT performance could be around £2 million lower than expected.
Meanwhile, Majestic said a major new pilot direct mail campaign for Naked Wines in the US had been unsuccessful and will result in higher costs in the first half of the year. As result, it now anticipates that the Naked Wines business will move back into making a small loss for the current financial year with an EBIT performance also approximately £2 million lower than expectations.
Rowan Gormley, Majestic chief executive, said: “It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group.
“The turnaround plan in Majestic Retail is progressing well, the key initiatives are on track to be delivered on time and on budget, and preparations for peak Christmas trading are well in hand. Naked Wines UK, Australia and the underlying US business continue to trade well, and we have managed to restore Lay and Wheeler to growth.”
