Majestic profits rise in ‘incredibly challenging’ market that’s only getting tougher

Majestic Wines’ profits rose by £9.8 million last year in spite of the current condition of the UK market, but as Brexit looms, chief executive Rowan Gormley warned that 2018 will be “even tougher”.

Rowan Gormley, CEO of Majestic Wines

Majestic Group reported that sales rose by 2.3% across all brands, driven by 11.3% underlying sales growth in Naked Wines, which received £14m in revenue from new customers using the service last year.

Pre-tax profits were also up by £8.3m, putting the retailer back in the black after reporting a £1.5 million loss the previous year.

Shares of Majestic group now sit at 457p apiece. The merchant also retained £24.9 million in free cash flow, half of which is to be invested in targeting a new customer base, Majestic announced earlier this year.

It intends to invest up to an additional £12m to grab new business, which will reduce its earnings in its 2019 financial year by up to £3m, but will result taking its “annual generation of future value from £48m to £80m-plus a year”, said a statement in April.

All this is being done in a “tough UK market,” said Gormley, who warned that retailers are only going to find conditions tougher as Brexit negotiations continue.

“We expect the U.K. market to remain tough,” said Gormley, “possibly even tougher than last year. Certainly trading since year end has been harder than the prior year in the UK.

However, Gormley was confident the retailer can continue to grow in the current market, adding that executives are already busy “planning for a great crisis.”

“We founded Naked Wines during the financial crisis of 2008 and proved that investing in acquiring customers and generating loyalty through great products and service, will drive profitable growth even in a tough market.”