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Christmas will be key for Majestic

RESULTS: Following a tough first half, Majestic Wine will need to perform well over the key Christmas trading period to justify the high rating of its shares
November 19, 2012

Majestic Wine was never going to have a vintage first half after the grim summer weather. Indeed, like-for-like retail sales growth of 0.6 per cent, while not disastrous, is seen as disappointing by many analysts. Moreover, sales weakness was compounded by a decision to pull out of the wholesale business - revenues from these low-margin activities fell from £10.4m to just £3.2m in the period. This move should boost group profitability but, initially, broker Investec estimates the drag on profits will be about £1m a year.

IC TIP: Hold at 466p

However, there were reasons to be positive ahead of the key Christmas trading period. Following the opening of nine new stores, overall retail sales grew 4.7 per cent to £109m and active customer numbers rose 11.6 per cent to 594,000. What's more, average spend per transaction edged up by a pound to £126. The group also delivered online sales growth of 14 per cent, which takes such sales to almost a tenth of UK retail. The posh-wine business, Lay & Wheeler, made good progress as did Majestic's two Calais shops. And the second half has started better with like-for-like sales 1.2 per cent ahead in the first six weeks, albeit against a weak comparative period last year.

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