Majestic profits halved on coporate cut backs
Wine warehouse chain Majestic Wine today said lower sales of champagne to recession-hit firms and the weak pound had more than halved annual profits.
Running out of fizz: Orders for Champagne by coporate customers have dried up in the recession.
The group reported a 55.8% slide in pre-tax profits to £7.4m after corporates reined in purchases of bubbly, while the strength of the euro put customers off 'booze cruises' and made European wines more expensive to buy.
Majestic Wine took a £5.3m writedown on the value of its French-based Wine and Beer World business. With this stripped out, underlying profits in the year to March 30 fell 22.3%, it added.
But the UK's biggest wine warehouse revealed a turnaround in recent trading, with like-for-like sales up 2% in the 10 weeks to June 8, compared with the 2.7% drop over the full-year.
The increasing trend for Britons to entertain at home has seen private customer sales hold up well, contributing to the recent pick-up in UK business, said Majestic.
Private sales make up by far the bulk of Majestic's business, accounting for around 75% of group turnover.
'What's happening is that people are entertaining more at home and drinking wine more at home - people are watching their spend, but wine is a part of every day life now,' said Majestic's chief executive Steve Lewis.
The firm has also been 'pleased' by sales to restaurants as it has tapped into the desire for wines from more adventurous regions, such as South Africa and New Zealand - which have also helped steer away from the more expensive euro-region.
Mr Lewis said he expects sales to corporates and its French arm to remain weak for the remainder of the year.
It has shut its distribution depot in Calais and reduced its French workforce, although the firm has avoided any redundancies by re-locating affected staff back to the UK. Majestic is instead focusing efforts on its core private UK customer base, offering free wine courses and tastings to promote customer loyalty.
The group also aims to continue with expansion plans in its domestic market, with another five outlets planned in the year to next March, which will take its estate to 155. It also recently snapped up fine wine specialist Lay & Wheeler, with sales performance since the £4.75m acquisition in March 'encouraging' so far.
How the tippers see it: Investors Chronicle from April 2009...
'It's a tough time for Majestic wine. Grim retail conditions and falling like-for-like sales are doing nothing to help this retailer. Despite a growth in e-commerce and healthy dividend yield, the threat from supermarkets may be too much. Its share are also expensively rated for a retailer. Sell'.
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