Majestic lords it as booze cruises lose

By This Is Money
Updated: 04:31 EDT, 15 November 2010

Majestic Wine's half-year profits surged by a fifth as it continues to reap the rewards of a decision to slash its minimum order.

You cruise, you lose: Weak pound and UK supermarkets promotions reduced numbers taking booze cruises

The company also revealed a robust performance in its French business after major supermarkets recently pulled out of Calais due to fewer Britons going on 'booze cruises'.

The French arm - Wine and Beer World, which has two stores in Calais and one in Cherbourg - increased sales by 22.9% on a constant currency basis.

Sainsbury's and Tesco both shut stores in Calais over the past year.

The weakness of the pound and an increase in alcohol promotions in UK supermarkets have led to a reduction in the number of people taking booze cruises to Calais to stock up on beer and wine.

The group reported a 20% increase in pre-tax profits to £7.3m in the six months to September 27 thanks to last September's move to cut the minimum order from 12 bottles to six.

Majestic's overall group sales rose 10.2% to £117.6m in the half-year.

Despite reducing the minimum order in September, the average transaction only decreased by 7.2% to £122. Like-for-like sales increased by 7.6%.

Sales through Wine and Beer World were boosted by the introduction of a guarantee that its wine prices were at least £2 per bottle cheaper than in its UK stores.

The French stores recorded underlying earnings of £574,000 for the half-year - more than three times the £187,000 profits it clocked up in the same period the previous year.

The number of customers visiting Majestic in the UK and France in the last half-year increased by 14% to 496,000. The chain said sales of still fine wine - priced at £20 per bottle or above - increased by 20.2% and now represent 5% of its sales through its stores. The company has introduced fine wine display areas into 96 of its stores and is rolling these out to the rest of its 160 UK stores.

Majestic aims to increase the number of its stores to 250. It opened stores in Redhill, Windsor, Totnes, Ashbourne, Bracknell, Canterbury, Cobham and a second store in Cardiff in the past eight months.

In the weeks following the half-year period, like-for-like sales had increased by 7.4% and Majestic said it is optimistic about the key Christmas trading period.

Majestic's strong performance comes at a time when many off-licences are struggling to compete with cheap deals in supermarkets. The UK's biggest off-licence chain First Quench Retailing, which owned the Threshers, Wine Rack and The Local brands and ran more than 1,000 stores, went into administration last October.

Majestic claims it is resilient as its offer is different to that of the supermarkets - it sells different types of wine and runs tasting events for customers.