Majestic Wines (LON:MJW) shares sank in early deals after it revealed margins were pinched during a challenging Christmas trading period.
The off-licence retailer revealed UK sales rose 3.7%, for the 10 weeks between October 10 and January 5, but it had to ‘invest’ 50 basis points of gross margin to ensure pricing remained competitive.
On a like-for-like basis UK store sales growth was 1.1%, which sees the corresponding figure for the first 40 weeks of the financial year at 2%.
Chief executive Steve Lewis said the ‘competitive pricing environment’ is expected to continue throughout much of 2015.
"Majestic delivered like for like sales growth of 1.1% in a difficult Christmas trading period characterised by promotional activity and we are now focused on delivering our final quarter's trading,” he added.
On AIM, Majestic Wine shares were down 57p, 14.36%, in early deals on Wednesday trading at 340p each.
Michael Campbell, analyst at Northland Capital, described the trading update as “encouraging” as he says larger retail businesses are experience declining sales.
He added that Majestic Wine’s shares had traded ‘robustly’ since its interim results in November - rising 11% through that period – and he believes a dividend yield of around 4.5% should attract investor interest.