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Sobering stuff from Majestic Wine

Problems on the commercial side and Naked Wines in the US will trim profits by £4m
September 21, 2016

Shares in Majestic Wine (WINE) collapsed by 26 per cent after the wine supplier warned a slump in commercial sales growth will leave annual results to April 2017 below previous market expectations.

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First-half trading on the commercial side, essentially a trade supplier, has been challenging, with sales broadly flat and margins down by around 200 basis points. Much depends on the seasonal trade developed towards Christmas, but on current trends the division could deliver profits around £2m below expectations.

There's more trouble at Naked Wines, where Majestic funds independent winemakers to make exclusive wines at preferential prices which are then passed on to customers. Trading in the UK and Australia is solid, but in the US, a direct mail campaign to attract new customers has been unsuccessful, and while this initiative has been stopped, costs incurred in the first half will still be higher. After making a maiden profit last year, Naked Wines is now expected to be loss-making in the year to April 2017.

Analysts at Peel Hunt have trimmed pre-tax profits from £16m to £12m and EPS from 16p to 12p.