UK multiple specialist Majestic has reported strong Christmas sales up 15% across the group, with its retail business seeing its biggest Christmas trading – but stiff competition on price saw gross margin down by 1% on last year.
The CEO of Majestic Wine, Rowan Gormley, in Majestic’s Mayfair store
Christmas accounts for nearly a third of the wine specialist’s annual sales, and like-for-like sales in its 211-strong retail stores rose 7.5%, it announced this morning.
Sparkling wine led the charge, with sales of 12% compared to Champagne’s more modest 3% rise. Portuguese wines also grew 160%, knocking Rioja off the top spot, while Chateauneuf du Pape also rose 8%. Gin was another a big winner, with sales up 55% (particularly Warner Edwards Rhubarb Gin which saw sales up over 1000%) and spirits now accounting for 5% of total sales.
This was its second strong Christmas performance in a row, following last year’s 7.3% like-for-like growth (up from 1.7% in 2015), although this year around 0.5% of the growth was a one-off due to transfer of customers sales from closed stores.
Fine Wine also saw a bumper year with Lay & Wheeler up a whopping 62.3%, compared to 27.8% at the interim stage, but the beleaguered commercial side of the business, which is expected to take a back seat, was flat, falling 0.8%. There was better news from online business Naked Wines (excluded from the trading update), which saw sales up 29%.
However the Group’s gross margin percentage was 1 percentage point lower than this time last year, reflecting the stiff competition on the high street and rising costs on the back of falling Sterling. The company noted this was due to “a combination of accelerated acquisition of new customers and the need to remain competitive in a heavily discounted UK market still coming to terms with recent currency movements”.
Retail analyst Phil Carroll of Shore Capital argued that while this margin seemed negative, it did serve to highlight Majestic’s effectiveness in competing and winning the customer “against a backdrop of heavy discounting in the grocer channel”. He added that the higher than expected retail growth of Majestic Retail, Lay & Wheeler and Naked, were effective compensations.
Chief Executive Rowan Gormley said the results showed the transformation plan was working, with profits expected to remain on track at £11.3 million, although he added that “flexibility” needed to be maintained.
“We said that we would be better prepared for Christmas than ever – and the numbers show that we did what we said we would do,” he said. “At this stage we are not predicting a change to long term margin expectations, but we need to retain flexibility to compete in a competitive market.”
Speaking to db following the publication of its half year results in November, Majestic Retail md John Colley refused to rule out price increases in the New Year in the wake of falling sterling and currency fluctuation. Majestic’s online business Naked Wines put up the price of some of its wines by 5% due to the falling value of the pound.
In November, the specialist wine retailer reported solid sales growth in the first half of the year, arguing that it was on the ‘tipping point’ of transforming its £4.4 million loss back into profit. It had earlier lowered its profit expectation by around £4 million on the back of poorer than expected sales of its US Naked Wines operation, and a disappointing performance of its commercial division.