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Majestic Wine toasts strong Christmas sales growth led by Naked Wines division

The wine seller said in an update for the ten weeks to 31 December that group sales had risen 6.3% on an underlying basis compared to 4.1% growth last year
Wine toast
The Naked Wines division reported year-on-year sales growth of 15.9%

Majestic Wine PLC (LON:WINE) has reported sales growth across the board for the Christmas period, led primarily by a strong performance in its Naked Wines segment which offset a slower retail market.

The wine seller said in an update for the ten weeks to 31 December that group sales had risen 6.3% on an underlying basis compared to 4.1% growth last year while its gross margin rose 0.4%.

READ: Majestic Wine slumps as it swings to loss in first half as investment and sluggish UK market eat into earnings

The performance was led by the group’s Naked Wines division, which reported year-on-year (YOY) sales growth of 15.9%, with its UK, US, and Australian arms growing 12.2%, 21%, and 14.8% respectively.

Growth in Majestic’s retail segment was slower, rising just 1.5%, which the firm blamed on “difficult trading conditions amidst economic uncertainty and weak consumer confidence” in the UK, with the growth reflecting improvements in its online and concierge propositions as well as an increased market share.

Retail’s gross margins, however, fell 1.2 percentage points YOY in what the group said was “a very price promotional market”.

Looking ahead, Majestic said while the Christmas period had been “more challenging than expected” for the retail market, it expected to report an adjusted pre-tax profit for the year that was “broadly in line with current market consensus”, which is currently estimated at between £11mln and £12.8mln.

Rowan Gormley, chief executive of Majestic, said consumer behaviour was “changing” and that the firm was “seeing a revolution in retail”.

“We think there will be winners and losers, and we believe we have what it takes to be one of the winners. We are uniquely placed, with the people, data and skills in place to succeed despite the headwinds we are seeing.”

Gormley added that trends reported in November, mainly strong growth in digital and overseas but headwinds in UK retail, were “the same” and that future plans would be set out in its full-year results in June.

The results will bring some cheer to shareholders, who were burned back in November when the firm swung to a first-half loss thanks to a sluggish UK market and investments into its growth strategy.

In a note to clients, analysts at City broker Liberum trimmed their target price for the group to 310p from 320p, saying the US uptick was "rather large" but this raised questions regarding "how and sustainability".

However, the broker added that it was "encouraged" that "margins continue to improve at Naked Wines" and made no changes to its forecasts for the full year.

In early trading Wednesday, Majestic shares were up 1.8% at 254.5p.

--Adds broker comment and updates share price--

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Majestic Wine PLC Timeline

April 10 2015

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