Majestic Wine suffers 'big wobble' in autumn trading

Majestic Wine blamed a "big wobble" in the wider market for an unexpected drop in sales during October. Its chief executive Steve Lewis said the upset reflected how worried customers were holding back funds for special occasions, or shopping when goods were on special offer.

UK like-for-like figures showed a 1.1% drop in the six weeks to 7 November after two weeks of disappointing sales in mid-October. A positive reception to Christmas promotions meant sales were now back in "nice positive territory", but Lewis said: "It is undoubtedly more difficult now than this time last year. When the consumer has a good reason to spend, such as the late summer weather, they spend. Then you have quieter months."

Majestic has until now bucked the downturn that has affected many high street retailers. It reported robust first-half figures with profits up 20% at £8.8m. Like-for-like sales rose 2.7% in the six months to 26 September.

The recent weak trading at Majestic has unnerved investors. Its shares, which had gained 17% over the past year, closed down nearly 4% at 400p. Analysts at Liberium predicted the retailer would downgrade its full-year profit forecasts by 2-3%.

Majestic Wine has benefited from an explosion in discerning wine drinkers in the UK, as well as a shift in 2009 from a 12- to a six-bottle minimum in-store purchase, which has encouraged its customers to shop more frequently. The collapse of off licences such as Oddbins, Wine Rack and Threshers has also helped it lift its market share from 3.2% to 3.9% in the past two years. Majestic, which is aiming to nearly double in size over the next decade, opened eight stores during the period, taking its total to 174.

Collins Stewart analyst Wayne Brown said the retailer had made a "disappointing" start to the second half but the bigger prize was the Christmas and New Year trading period, which accounts for one-third of annual sales and half its profits: "Majestic is targeting the non-supermarket market, where there is no other wine retailer with such a wide range, scale and a differentiated positioning in the UK."

With the eurozone debt crisis raising fears of a double dip recession, the British Retail Consortium warned last week that the fall in underlying sales in the industry for October augured badly for festive trading, while John Lewis said its sales had dipped in the week to Saturday.

Give the tough trading backdrop, Lewis anticipated the supermarket giants would use eye-catching champagne deals to win custom over the holidays, and was determined to hold its own with offers such as Nicolas Feuillatte for £15 and Heidsieck Gold Top for £18. "We decided champagne would be a key battleground and to go in fighting," he said, adding: "There is no evidence the Majestic consumer has reached their (financial) limit."

Majestic said Britons were staying in more but were treating themselves to a nice bottle of wine to enjoy with their evening meal: "A bottle of Pinot Grigio in a mid-ranking pizza chain is about £18. For £20 a bottle in a Majestic store you can have a bottle of fine wine that you can really talk about." The average bottle price of still wine sold by Majestic costs £7.13 compared with £6.67 a year ago, a trend the retailer insisted was not a reflection of its prices but customers trading up.