Majestic Wine unveils turnaround to deliver £500m sales by 2019 as profits halve
Majestic Wine has unveiled a three-year plan targeting over £500m sales by 2019 as part of a shakeup that saw the company buy Naked Wines in April and its founder Rowan Gormley take over as chief executive.
The FTSE 250 wine retailer has struggled over the last few years with stiff competition from major supermarkets, overly complicated prices, and outdated computer systems, which means it has been slow to grow online.
Gormley said that under the new transformation plan, Majestic will take money it would have spent on opening new shops and invest it in attracting more customers instead – a model it has already established at Naked Wines.
“The return on investment in Naked Wines from customer acquisition and retention is north of 75 per cent, which is higher than what you get from opening stores,” he told City A.M.
It is now targeting a portfolio of 230 stores compared with previous target of 300, which is just 19 more than it has today.
Instead the group plans to increase spending on training staff, IT, and improving its marketing by partnering with retailers that have similar customers such as shirtmaker Charles Tyrwhitt. It has already simplified its prices by scrapping its six minimum bottle rule and spruced up stores by introducing more wine tasting events.
Gormley said improvement made to staff bonus structures and training was already paying off, with like-for-like sales at Majestic stores rising by 2.3 per cent in the six months to 28 September.
“Staff are the backbone of our business and a lot of changes have been made in making their jobs more exciting and giving them opportunity to earn proper reward. We have put more money into training and improved the bonus structure,” Gormley said.
Reported profit before tax halved over the six months to £4.3m from £8.5m last time, which the company blamed on exceptional charges and costs related to its acquisition of Naked Wines this year.
However adjusted earnings before interest and tax (EBIT) EBIT rose by 12 per cent year-on-year to £9.5m while earnings excluding the Naked Wine business increased by six per cent, thanks to strong commercial sales – up eight per cent.
Naked Wines, whose customers help forward-fund independent vineyards in return for exclusive wines at wholesale prices, saw sales leap by 35 per cent in the period thanks to its booming popularity in the US.
“We have a clear plan, which will require investment and take three years to complete, but will also deliver a better business that can create sustained growth in shareholder value.
“As a result, profit for the current year is expected to be impacted by the increased investment derived from our successful test period after which we expect to see sustainable growth as the anticipated returns from our initiatives are realised," Gormley said.