Majestic Wine swings into the red

The second half of the year was far stronger: operating profits grew by 51 per cent year-on-year, whilst return on investment on new customers acquired by Naked Wines rose by 139 per cent, according to broker Liberum. It was the attempt to recruit new customers in the US by Naked Wines which had previously failed miserably. A direct mail campaign was aimed at improving the rate of new customer recruitment, which ultimately didn’t happen. This resulted in a high level of marketing costs, helping to force the group into the red.

Chief financial officer James Crawford is sanguine in retrospect. Yes, the mail campaign didn’t achieve its principal aim, he admits, but the business didn’t actually lose customers as a result. It did manage to recruit some new punters, just not at the rate expected.

The market may be more concerned about Majestic’s fortunes on home soil this year as price inflation and wider economic uncertainty squeeze consumer spending. But is blaming the recent political turmoil fair? Mr Crawford says as far as profits go, yes, but the top line is a different story: "Wine is an everyday product," he says. "We’d need economic Armageddon for people to stop buying it altogether." Should a downturn manifest, Mr Crawford is confident wine would remain "a small luxury" for people cutting back on dining out. But the company is still forecasting sales growth to slow from double-digits to low-to-mid single digits in the year ending March 2018.

Analysts at Liberum expect pre-tax profits of £16.7m in FY2018, giving EPS of 17.1p, compared to £12.9m and 16.3p in FY2017.