Majestic Wine, the British wine warehouse chain, stated a decline in profit for the first half, due to increased competition and higher investment costs.
Pre-tax profit fell 10% to £8.5 million compared to last years result. The company explained that the “previously announced investments” to upgrade its distribution network, website and customer database hurt performance, but were necessary to preserve its market share.
The updates contributed to the 4.3% gain in Majestics share in the U.K. wine market. Meanwhile its website reported a 60% jump in “click and collect” orders. Online sales increased 12.3% year-on-year to £12.9 million, which accounted for 10.8% of U.K retail sales, up from 10.3%.
“Our market share is still growing, and our upgraded website means customers now have visibility of stock in their nearest store” said CEO Steve Lawis.
Sales to business customers grew 4.9% to £26.8 million compared to last years £25.6 million. Revenue from Fine wine, priced at £20 per bottle and above, increased 22% to £9.0 million.
Overall revenue for the six months ended September 29 edged up 2.8% year-to-year to £134 million. The companys customer base increased 2% to 643 000, with the average spend per transaction climbing to £130. Majestic also stated increase in average bottle of still wine bought at their stores to £8.02.
Majestic also reported it opened four new stores in Leighton Buzzard, Hexham, Loughton and Addlestone for the first half. Since the end of the period the company opened two more, bringing the total number of Majestic stores to 210. The company also plans to introduce another three before Christmas.
Majestics premium fine merchant Lay and Wheeler suffered a 78% drop in pre-tax profit to £127 000 after a “disappointing Bordeaux 2013 campaign” and a “good but not great” performance of vintage wine.
However, Mr. Lawis expressed confidence that during holidays Majestic can beat the competition it faces from both high-end grocers such as Waitrose and discounter like Lidl, which recently started offering a range of premium wines.
“We can deliver a level of customer service that the supermarkets can’t match – whatever the supermarket,” he said, commenting on the popularity of in-store wine tastings.
Majestic Wine PLC lost 1.94% on Friday and closed at GBX 366.00 in London. On Monday to stock fell 0.48% to trade at GBX 364.25 at 15:23 GMT, marking a one-year decrease of 33.47%. The company is valued at £240.23 million. According to the Financial Times, the 2 analysts offering 12-month price targets for Majestic Wine PLC have a median target of GBX 405.00, with a high estimate of GBX 460.00 and a low estimate of GBX 350.00. The median estimate represents a 10.66% increase from the last close price of GBX 366.00
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