Wine firm Majestic posts stellar performance as big-name rivals collapse

By Rupert Steiner for the Daily Mail
Updated: 17:10 EDT, 14 November 2011

True to its name Majestic believes it is a cut above the rest when it comes to quenching the nation’s thirst.

The wine warehouse chain has not only survived as big-named rivals collapsed, but yesterday it posted a 20 per cent rise in interim profits.

The stellar performance is in stark contrast to that seen at other retail giants.

A raft of firms have posted profits warnings, shrunk store networks, and even pulled the plug on household chains. 

Austerity-hit consumers have been tightening their belts. The dominance and scale of the grocers has not helped the booze groups dealing a fatal blow to Thresher’s-owner First Quench and Oddbins, but Majestic has proven resilient.

The firm, which trades from 174 out-of town stores saw a healthy rise in pre-tax profit to £8.8m from £7.3m for the six months to September 26, on total sales of £127m.

It managed to post underlying sales, up 2.7 per cent, despite the average selling price of a bottle of wine rising to a chunky £7.13 from £6.67. Not bad during a downturn – even the interim dividend was hiked 15.2 per cent to 3.8p-a-share.

Chief executive Steve Lewis believes the strong recent performance is still a hangover from reducing the minimum number of bottles customers must purchase from 12 to six.

With an average basket costing £125 this gives it enough of a margin to offer customers some added extras.

Majestic offers parking at all but two stores, delivers wine to homes at no extra cost, and lends free glasses and ice buckets.

The secret to Majestic’s success is more complex. It offset the impact of the cut-price grocers by carving a niche as an upmarket vintner. It did not bother to complete by selling cheap plonk to the masses, choosing instead to employ graduates to educate customers about wine with tastings and education.

It has differentiated itself and proves that well-run businesses, with a bit of imagination and the flexibility to cater to what customers want, can prosper even in tough times.

Majestic’s managers have also been encouraged to personalise their individual store websites and make their shops their own.

They become a magnet to draw in regular punters, such as old fashioned pub landlords.

In short, there is no-one else out there of any scale offering customers a specialist wine service.

Wayne Brown, an analyst at broker Collins Stewart, said Majestic has also benefited from a reduction in the number of rivals. ‘Structurally Majestic is a winner benefiting from the demise of Oddbins, Wine Rack and Threshers,’ he said.

With a 3.9 per cent share of the £6bn UK wine market Majestic still has some way to go reverse the stranglehold grocers have on the market, which stands at 82 per cent.

Despite the festive cheer shares fell 16p to 417p after Lewis warned underlying sales in the six weeks to November 7 had slipped to 1.1 per cent. Investors will be hoping Majestic has not run out of fizz in the run up to the crucial Christmas trading period.