TIDMWINE
RNS Number : 3770K
Majestic Wine PLC
21 September 2016
For Immediate Release 21 September 2016
Majestic Wine PLC
Trading Update
Majestic announces profits below expectations in 2017, but
remains on track to hit 3 year plan of GBP500m in sales by 2019
Majestic Wine PLC (the "Group") today announces that
despite;
- Majestic Retail trading on track and making good progress on the transformation plan
- Naked Wines UK and Australia are performing well and on plan
- A return to growth for Lay & Wheeler
EBIT for the current financial year ending 3 April 2017 is
expected to fall below current market expectations(1) . This is
because:
1. Majestic Commercial
As detailed in our annual results for the year ended 31 March
2016, the Commercial business was not growing sales at the level to
which we aspire and that necessary investment in new business
development and the store network had reduced our profit growth to
just 1% for the year.
The first half of the current financial year has proved to be
even more challenging with the result that Commercial sales growth
is flat year on year and the gross margin percentage achieved on
those sales has declined by around 200 basis points. Assuming these
negative trends persist through to the end of this financial year,
and with the balance of the year being seasonally significant, the
Commercial division's EBIT performance could be around GBP2m lower
than expectations.
We need to find a better, more profitable approach for our
Commercial operations as part of the Group and as a result an
internal review is now underway.
2. Naked Wines USA
In our annual results we also explained that Naked Wines had
made an 'unscheduled' maiden profit last year following a decision
to reduce marketing in the USA whilst low stock levels were
replenished. During the first half of the current financial year,
improved stock levels have meant that we were able to resume our
investment in acquiring new customers ("Angels") in this
region.
The decision was taken to accelerate a number of initiatives,
including testing a significant new direct mail campaign. It is now
clear that, whilst most initiatives were successful, the direct
mail campaign was not. We have now stopped this investment, but the
short term impact will be higher costs in the first half of the
year, with fewer new Angels acquired than hoped also impacting
profits over the next 12 months. Accordingly, we now anticipate
that the Naked Wines business will move back into making a small
loss for the current financial year with an EBIT performance also
approximately GBP2m lower than expectations.
Whilst it is disappointing that the direct mail channel has not
proved to be as viable as early tests suggested, we are getting
very encouraging returns from other channels, and are ready to
scale them when we are confident that the returns are
sustainable.
Rowan Gormley, Chief Executive commented:
"It is very disappointing that two isolated factors are
distracting from the great progress across the rest of the Group.
We have always said that we would adopt a test and learn approach,
and be quick to redeploy capital from underperforming areas, which
is exactly what we are doing. While, this approach is delivering
good results in the other business units the scale of the US market
means that even a test can have a material effect on profits.
The turnaround plan in Majestic Retail is progressing well, the
key initiatives are on track to be delivered on time and on budget,
and preparations for peak Christmas trading are well in hand. Naked
Wines UK, Australia and the underlying US business continue to
trade well, and we have managed to restore Lay and Wheeler to
growth.
Despite these two factors, I am pleased to say we are still on
track to resume dividend payments this year and to deliver our goal
of GBP500m sales by 2019. We look forward to giving more details at
our Interim results in six weeks time."
A further update will be given at the time of the Group's
Interim Results on 17 November 2016.
For further information, please contact:
Majestic Wine PLC Tel: 01923 298 200
Rowan Gormley, Chief Executive
Officer
James Crawford, Chief Financial Tel: 07891 206239
Officer
Gabriella Clinkard, Public
& Investor Relations
Investec (NOMAD & Joint Broker) Tel: 0207 597 5970
Garry Levin / David Flin /
David Anderson/Carlton Nelson
Liberum (Joint Broker) Tel: 020 3100 2222
Peter Tracey / Anna Hartropp
/ Richard Bootle
About Majestic Wine PLC:
Majestic Wine PLC is a leading wine specialist, operating in
four separate divisions, each with the fundamental goal of
delivering sustained growth in shareholder value by doing the right
thing for the Group's customers, suppliers and people:
--Majestic Retail - The UK's largest specialist wine retailer,
with 210 branches in the UK and 2 in France. We help people find
the wines they will love through over 900 highly trained,
specialist store team members. Sales for the year ended 28 March
2016 were GBP244.0m.
--Naked Wines - Funds independent winemakers to make exclusive
wines at preferential prices which we pass onto customers. Naked
Wines currently has 152 winemakers in 14 countries and 301,000
Mature Angels (Customers). Sales for the full year ended 28 March
2016 were GBP104.3m (GBP102.5m of this was post acquisition).
--Majestic Commercial - A specialist on-trade supplier who aims
to support businesses to make their wine lists more profitable,
with the unique advantage of running their supply chain through
Majestic Retail stores. Sales for the year ended 28 March 2016 were
GBP45.6m.
--Lay and Wheeler - A Specialist fine wine merchant. Lay &
Wheeler aims to be a trusted guide for people who love fine wine,
supplying the world's finest wines with a personal service. Sales
for the year ended 28 March 2016 were GBP10.0m.
(1) The board believe current consensus PBT for the year ending
April 3 2017 to be GBP16.1m
This information is provided by RNS
The company news service from the London Stock Exchange
END
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