Majestic defies difficult summer

19th November, 2012 by Gabriel Stone

Majestic Wine has reported a 3.9% increase in pre-tax profits to £9.2 million for the six months to 1 October 2012, driven by online sales growth, a strengthened customer base and shift towards on-trade sales.

Despite seeing its summer trading hit by poor weather, the UK-based wine merchant reported an 11.2% rise in the number of active customers on its database, with the average spend on still wine increasing from £7.46, compared to £7.13 a year ago.

While sales through its expanding number of outlets – the company opened nine new stores during the period – rose by 4.5% to £108.7m, online sales saw even stronger growth of 14%, with a 19.9% uplift in the number of orders placed via the internet.

This increase, which means that 9.8% of the firm’s total UK sales are now generated online, was supported by the launch of a new mobile-optimised website and Majestic’s decision to reduce the minimum purchase to six bottles in line with its in-store policy.

Despite this online growth, Majestic confirmed plans to continue its store expansion plan. With 189 outlets in total to-date, Majestic chairman Phil Wrigley said: “We are pleased by the initial sales recorded in all these stores and continue to see the potential to expand the UK store portfolio to 330 locations.”

Wrigley also outlined the impact of Majestic’s strategic shift away from the wholesale channel as it strengthens its focus on developing on-trade business instead.

As sales to business customers fell by £5.4m to £23.6m, representing 20.5% of total UK sales, Majestic’s 25-strong regional on-trade sales teams helped to drive sales growth of 17% from these accounts.

With logistics for this hotel, pub and restaurant side of the business handled by local Majestic stores, aided by a dedicated office and team in London, Wrigley noted: “We see considerable potential for further growth from this channel, leveraging our nationwide presence, excellent in-store service and flexible delivery arrangements.”

At Majestic’s fine wine subsidiary Lay & Wheeler, pre-tax profits rose to £506,000 from £292,000 in the first half of last year, thanks to income from the buoyant 2009 Bordeaux en primeur campaign.

However, Wrigley suggested that this figure was likely to dip again as a result of the most recent, more challenging 2011 Bordeaux en primeur season, which will not be reported by Majestic until 2015.

“The quality of the vintage was reasonable, however demand from consumers was low following two exceptional vintages,” he observed.

Having reduced its presence in France to two stores in Calais and Coquelles, Majestic saw pre-tax profits rise from £658,000 to £817,000 as UK customers took advantage of lower French alcohol duty.

Reporting like-for-like sales growth of 1.2% in UK stores for the first six weeks of its second half, Wrigley offered a measured but positive short term outlook.

“We recognise that the environment in which we operate is likely to remain challenging”, he said, but added: “We are most encouraged by the number of new customers attracted to Majestic and we are well prepared for the very important Christmas trading period.”

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