Majestic Wine Share Discussion Threads

[bobsidian] 11/4/2015 11:05

Given that the discount mechanism deployed by equity markets seems to be looking at least 2 years into the future to warrant valuations ascribed elsewhere it will be interesting to see what market forces make of such a commercial move by MJW. You do not need to look too far to see the current insanity of equity markets. WTB is trading on a P/E of 30 times current earnings and a PEG factor in excess of 4 whilst offering a dividend yield of about 1.25%. And it as an entity is hardly debt free.

From a technical perspective it was noteworthy that the share price of MJW took a dive down through the 61.8% Fibonacci retracement level - a 61.8% retracement of the entire move up from its 2008 low to its 2013 peak - before staging its share price reversal.

[cockneyrebel] 11/4/2015 10:22

Thanks re the link cestnous - yesterday's volume has only been beat once in the last 10 years bye the way.

CR

[cockneyrebel] 11/4/2015 10:01

Gormley said the deal provided “the very exciting opportunity to build a world-class wine retailer, serving customers who are looking for inspiration that the supermarkets cannot provide”.

He added: “This is great news for the customers, staff and suppliers of both businesses and will ultimately create significant shareholder value.”

Phil Wrigley, Majestic’s chairman, described the deal as “transformational”, saying the two businesses had “significant strengths which are very complementary”.

He added: “Majestic’s distribution skills, a nationwide UK store network and customer service orientated knowledgeable staff are a perfect fit with Naked Wines’ unique sourcing and selling model.

“This acquisition will significantly accelerate the planned development of Majestic’s online capabilities whilst providing Naked Wines with a nationwide store network to allow a click-and-collect delivery option for its customers.

“In addition, this acquisition opens up attractive international markets, increasing our potential customer reach eight-fold.”

He added: “[Gormley] has a fantastic track record as a successful businessman, innovator and entrepreneur in the wine industry and beyond. He has also assembled a deep pool of talent at Naked Wines with a similar culture to Majestic.”

Analysts at brokerage Investec Securities said they were upgrading shares in Majestic to a “buy”.

In a note, analyst Kate Calvert said: “The acquisition of Naked Wines… represents the sort of radical thinking we were hoping would come out of the strategic review and gives Majestic growth opportunities beyond the UK.

“Both businesses have much to gain from each other.

“We expect Mr Gormley to look to unlock Majestic’s online potential, improve its CRM [customer relationship management], leverage its store network distribution and moderate store roll out plans.”

[cockneyrebel] 11/4/2015 09:58

"What will come online quickly, however, is a click-and- collect service that will enable Naked Wines customers to pick up their purchases at Majestic stores. “There’s surprisingly little overlap between the two sets of customers,” said Mr Gormley. “We can do that in places like London, where a home-delivery model doesn’t always work well for them.”"

CR

[cestnous] 11/4/2015 09:27

Three quarter page article on MJW in FT today; also favourable comment on the Lex (back) page. Paper copy so no link, sorry.

[jazza] 10/4/2015 23:24

CR, it seems most don't "get" NW's model - particularly the loyalty it engenders.

That's to our benefit.

[goliard] 10/4/2015 21:41

RandonAmbler - completely agree. It may have finished up today but it is two years from now that concerns me. Cost for Naked wines of getting and retaining customers is high.

[topvest] 10/4/2015 20:29

Looks a desperate deal to me. An earnings diluting acquisition which has caused the dividend to be stopped and the MD of the loss making business taking over at Majestic. Taken this off my watch list now as it looks like a slow car crash!

[she-ra] 10/4/2015 17:08

This move by Majestic has to be a good thing to deal with the threat from the supermarkets and Lidl particularly. Lidl buying all that Bordeaux will have got Aldi sitting up and thinking and they will respond. Naked Wines seems a great concept with an international dimension. Lets hope it will be managed right but there maybe no fear of it not being when the CEO of NW has become the CEO of Majestic.

[cockneyrebel] 10/4/2015 16:56

Cheers spooky :-)

CR

[spooky] 10/4/2015 16:49

MJW - Well done CR.

[cockneyrebel] 10/4/2015 16:31

15% intraday reversal today on massive volume.

Says it all imo.

CR

[cockneyrebel] 10/4/2015 16:25

Naked Wines founder takes charge of Majestic Wine after £70m deal

Firms said the combination boosted Majestic’s online presence while providing Naked Wines with a nationwide store network

[brahmsnliszt] 10/4/2015 16:10

Those toes are doing rather nicely :-)

[jazza] 10/4/2015 15:58

Rambler,

I joined NW on Wednesday.

(Discounted) Introductory case arrived an hour ago. The joiner discounts probably explain, in part, lack of profitability as they rapidly build their customer base.

The website and the paperwork that came with the case place a big emphasis on the collaboration between producer and "investor/consumer" - all a bit fluffy maybe but it presses the right buttons.

I had to have it delivered today as I work away mon - thurs. Would prefer to click & collect and my local MJW is as good a place as any.

The tie-up, to my mind, works.


- I'm unconvinced by the synergies in that Majestic already has an online presence and Naked has a very good delivery setup of its own (and Naked wines aren't going to appear in Majestic stores)

[she-ra] 10/4/2015 15:33

Two drunks propping each other up?

[cockneyrebel] 10/4/2015 15:15

The divi news was probably the cause of the dip today imo investorscampion - income funds selling imo.

That divi news is baked in the cake now and the growth funds looking to get in as the income funds leave imo - hence the 3% of co's shares traded today and now trading positive.

All imo/dyor etc.

CR

[randomambler] 10/4/2015 14:45

Some more thoughts on today's announcement after a bit of consideration.

In one sweeping move they're buying Naked Wines for 70M and installing the founder of NW as the new CEO for the group. I certainly didn't see this coming but Majestic needed to do something to shake up the business and this bold acquisition certainly fits the bill.

In the same statement they mention that pre-tax earnings for the year will come in at around 21M. This is a bit of a profit warning as this is around 10% down on last year's figure of 23.8M and hidden within this is some further bad news; last year the H2 earnings came in at 14.2M while this year the guidance is now for 12.4M in H2 (which includes Xmas). So there's a second-half drop of 13% which is an acceleration from the reported H1 drop (although there will be interest paid here from the net debt position).

At the same time sales are actually up ("Since Majestic's Christmas trading update on 7 January 2015, total store sales have grown 4.1%, up 1.5% on a LFL basis.") which means that margins are down - either as a result of promotional pricing or increased costs. A somewhat worrying statement is that March was poor ("January and February were in line with expectations but March was weaker with adverse foreign exchange movements in March") and that FX movements played a part in this. I wonder if these will reverse and what the size of the loss is here.

The other bad news is that the final dividend for 2015 is being axed along with the interim dividend for 2016 - with the only guidance on future dividends being that they will be incrementally re-instated out to 2018. Another surprise given that one of the attractions of Majestic Wine (LON:MJW) is its yield and there's no guarantee of it becoming a high-yielder again.

So I think that this statement is a bit of a curate's egg...

Pros:

- New CEO looks very dynamic and has a proven track-record in the wine business
- Naked has a real focus on customer service and this seems to come from the top (see hxxp://www.nakedwines.com/rowan)
- Majestic needed to stop its expansion plans and come up with something new to refresh the business
- Group may start to attract attention in the market and may get re-rated in time
- Majestic business is very cash-generative and should be able to repay debt fairly quickly with much reduced capex and dividend payouts

Cons:

- New CEO is likely to kitchen-sink whatever he can in the Majestic accounts and this could be messy
- No dividends for a year and no real guarantee of a good yield in the future
- I'm unconvinced by the synergies in that Majestic already has an online presence and Naked has a very good delivery setup of its own (and Naked wines aren't going to appear in Majestic stores)
- Management teams are being retained on both sides so there's no stripping out of duplicated costs
- The businesses will be operated separately so they'll both bear their current advertising and acquisition costs
- A hefty amount of debt is being taken on and interest payments may amount to around 10% of pre-tax earnings
- Naked is currently loss-making and will thus act as another drag on earnings in the short-term
- Exposure to US and Australia isn't obviously beneficial for Majestic stores
- Some Naked investors/customers will leave as see this as a takeover by a nasty corporate giant

Overall I do view this as a transformational deal for Majestic but I'm not sure that the reasons given for the merger are all that compelling (compared to Shell taking over BG for example). There's a heap of execution risk here with one struggling business taking over a loss-making one but if they can carve out an improved market niche then things could turn out well. Rowan Gormley has it all to play for and his efforts will certainly be closely watched!

[cockneyrebel] 10/4/2015 14:43

Director buy.

CR

[cockneyrebel] 10/4/2015 14:21

"Investec's retail analyst, Kate Calvert, said the Naked Wines deal "represents the sort of radical thinking we were hoping would come out of the strategic review and gives Majestic growth opportunities beyond the UK". She added: Both businesses have much to gain from each other."

[cockneyrebel] 10/4/2015 12:59

Gonna go positive later today?

CR