Majestic Wine said a cocktail of tax increases and bad harvests had caused a sales headache for the company as it reported flat annual profits.
Chief executive Steve Lewis blamed rising wine prices for a small decline in like-for-like sales at the retailer but pointed to encouraging trends, such as sales of fine wine – bottles priced at £20 and above – which climbed by nearly a fifth. "We had consecutive wine duty increases and there were bad harvests in the both the northern and southern hemisphere, inevitably that led to price inflation," he said.
The wine specialist made a pre-tax profit of nearly £24m – a small increase on last year – on sales of £278m, which was in line with City expectations following a shock profits warning in March. The retailer was caught out by a slowdown in sales after Christmas, as consumers cut back spending on wine. Duty on a bottle of wine has increased from £1.81 three years ago to £2.05, the company said.
The average bottle price at Majestic increased by 38p to £7.94, with the average spend per customer rising by a pound to £129. Within that rosé wine from Provence proved appetising, with sales up 84% over the year while sales of malbec from Argentina, France and Chile rose 50%. Sales of fine wine increased nearly 20% to £18.7m as Britons splashed out on dinner party wine "you can have a conversation about", Lewis said.
The volume of wine sold in the UK has declined in each of the last three years as higher prices made shoppers think twice about putting a bottle of wine in their shopping trolley. But Lewis said Majestic had bucked this trend with the retailer's market share increasing despite fierce competition from supermarkets – including Waitrose, which has launched a new online wine service – where the majority of wine is bought.
Majestic is forecasting another year of "flattish" profits before returning to growth in 2016. The company is moving its distribution centre to a larger site able to cope with plans to expand from 206 to 330 stores and is also investing in marketing as it looks to offer shoppers a more personalised service. Lewis said: "We need to up our game and fight a lot harder."
The shares closed down 1.5p at 432p
