Analysis: Majestic’s shock change of tack

How widespread is the disposal?

At the moment, it’s still slightly unclear what exactly will be up for sale. The company statement said it would fund the accelerating growth in Naked by releasing capital from Majestic through a combination of store closures, asset sales and ‘migrating customers and stores to the Naked brand’, but little more detail of how many stores or job losses will be available until June, it said.

Analyst Jonathan Pritchard of Peel Hunt told db the wine retailer’s announcement “hinted that they want as clean a break as they can get” and analysts db has spoken to believe the company will look to sell the whole of the retail division, which netted sales of £264m in 2018, and an operating profit of £13.3m as well as its commercial business, which clocks sales of around £43m, on operative profit of £2.4m, and fine wine business, Lay & Wheeler.

Both Majestic Commercial and Lay & Wheeler were conspicuous by their absence in this morning’s announcement, but it seems highly likely that these two will also be disposed of non-core to the transformed business in addition to the retail estate.

According to Brown at Liberium, Lay & Wheeler may be easier to value and dispose of, due to it being more of a standalone business.

“I think it’s easier to put a value in Lay & Wheeler, there’s an element whereby Majestic Commercial is dependent upon the retail business, they are not mutually exclusive from each other,” he points out.

Click below to continue our analysis of the new strategy…

9 Responses to “Analysis: Majestic’s shock change of tack”

  1. Trundlesome1 says:

    What a contrast to when I worked there in the late 90s, early 2000s. A fast growing business under Tim How that seemingly could do no wrong. He always said to us quite openly that Majestic would be in trouble if the supermarkets became more competitive. It is a pincer movement. Aldi from one side and Waitrose and M&S from the other.

  2. Charles Crawfurd says:

    In my humble opinion a very strange decision to dump the Majestic name which has a far better image than Naked ever will. OK Majestic needed to cull the number of stores etc to meet modern trends and lower costs but that could have been done and made it much more of an on line retailer that could challenge the wine society et al. I am sure they will be the winners in gaining those top end customers rather than Naked. Tim How if he is still around must see this as a very sad day.

  3. KOP says:

    I’m not surprised at all at what’s happened – looking at it now as a former supplier and shareholder, the current management teams handling of the business is about as good as our Prime Minister’s feeble attempt to manage brexit. Time for a seasoned Professional to step in and clear the decks – DAN J where are you ?

  4. At what cost Naked Wine is growing? By giving wine away? Once the cash from Majestic will finish, Naked Wine will soon disappear. If Naked Wine worked when it started due to their marketing, now they are forced to give wine away to get new subscribers and still, are struggling. Majestic wine is fuelling Naked Wine false growth.

  5. And lets not forget that Naked Wine was the creature of the CEO, Majestic was already there. A previous comment mentioned Brexit, the CEO choice is like our PM wanting to pass her deal despite not having the support, so is the CEO. The two businesses together cant survive at least under that management, so the one that will go is majestic. If there was another CEO would have probably chosen Naked Wines

  6. MD says:

    The writing has been on the wall for sometime now for multiple retail specialists…that’s why Majestic is the last one! They simply cannot compete with the supermarkets. Shedding some stores and re-branding some as Naked Wine stores is not a bad idea but it will only be a temporary measure. Maybe they should consider a joint venture with a major coffee brand to increase footfall?

  7. Peter Hanna says:

    It’s sad to see Majestic go. It is another illustration of the difficulties of working on low margins. I’m afraid retailing wines, without other product range to support the low margin cannot work. We’ve seen the loss of Oddbins/Threshers/Vic. Wines and now Majestic. The model of being a National wine retailer is bust. It’s bad news for wine lovers, the Supermarkets have defeated the specialists, and to pile more misery on the wine lover is the news the Supermarkets are moving more to own label and presumably importing bulk wine and UK bottling. Being able to wander around the store and browse the wine range with the possibility to taste before buying will be a thing of the past. Sad news

    • Hugh Sturges says:

      Hi Peter

      There are always the independents, sourcing and supplying interesting wines, often owned by passionate wine lovers and most offering tastings on a regular basis. Support your local High Street.

  8. Tim Waters says:

    The model of being a national retailer in any field is bust. All costs are rocketing – rents, business rates, (minimum) wages and, more importantly, the growing commoditisation of products in light of ever-widening availability makes convenience a bigger deciding factor as to how and where to shop than quality or service. As a result, specialist retailers, as in those with focused product ranges, need an awful lot more to differentiate themselves and create a compelling reason for customer loyalty than the product itself. In the ‘old days’ enthusiastic and knowledgable staff’ kept retailers like Oddbins and Majestic punching above their weight – but it is no longer the ‘old days’ – even online retailers like Naked Wines are fast passing their sell-by dates. Some new ideas, please !

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