Analysis: Majestic’s shock change of tack

Who might be interested in buying the retail estate?

Until Majestic unveils the exact number and location of the stores it is likely to dispose of, and those it intends to keep and rebrand as Naked Wines, it’s hard to tell who, if anyone, might be interested in buying all or part of the estate.

The estate currently comprises around 200 retail stores, with approximately 16 in London, a further 23 within the M25, and the rest spread out across most regions of the UK. (According to its website, there are 24 stores in the South East, 34 in the South West, 11 in East Anglia, 26 in the Midlands, 5 in Wales, 31 in the North and 14 in Scotland, the majority located in the central belt).

Shore Capital notes the average lease length is less than 5 years and around 40 of the stores are freehold properties.

So who is in the market for snapping up stores?  As Shore Capital analyst Greg Lawless pointed out in an analyst note this morning, there are already around 100 or so booze stores potentially for sale from the high street’s previous off-license casualty, Oddbins and its sister retail brands, that have yet to be sold out of administration, making it a bit of a buyer’s market.

“It remains to be seen how much appetite there will be in the wider retail market for a chain of approximately 200 wine warehouse stores but we note that Majestic is a well-known brand with a good client base,” he wrote.

With potential buyers on kind of scale thin on the ground, it is more likely the estate will be sold in parcels or through “a hybrid approach by retaining a parcel of stores to trade under the Naked Wine fascia, and then either parcel up packages of stores and close the remainder of the portfolio,” according to Lawless.

Retailers known to be looking to grow their estates include Aldi and Lidl and The Co-op but while many of the warehouse style stores are slightly out of town – locations which might potentially suit an Aldi or Lidl – Pritchard thinks it “staggeringly” unlikely, given the size of Majestic’s stores.

“In terms of another household name retailer, it’s pretty unlikely that anyone would be interested,” he told db. “It may be that Aldi or Lidl will be interested in ten stores, the trouble is everyone wants the same dozen or 20 stores, but are less keen on the other 180.”

A potential buyers could also emerge from the private equity sector, he noted. “It’s not impossible that someone from that part of the market steps in”, he said, adding that Majestic have also said it could sell some stores for conversion to residential.

And as already mentioned, there is also the question of who might buy the Commercial division, and fine wine arm, Lay & Wheeler.

Click ‘next’ 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 !

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe to our newsletters