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Majestic Wines profit’s not going off with a pop

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Total group sales for the 26 weeks ended 29 September 2014 were £133.8m for UK’s largest retailer of wine by the mixed case, a 2.8 per cent increase from £130.2m in the first half of last year.

Pre-tax profit fell to £8.5 million pounds in the 26 weeks ended September. (29 from £9.5 million pounds a year earlier.) Online sales for the company have increased 12.3% to £12.9m, which is now representing 10.8% of UK retail sales compared to 10.3% in 2013.

Chief executive Steve Lewis said: “Majestic has a compelling proposition with a differentiated model, strong customer service ethos and a clear strategy to deliver growth. The 2015 financial year is one of investing to put in place the building blocks to deliver future growth and shareholder value and we are progressing to plan.”

In the context of a competitive marketplace, the latest results from Majestic are relatively robust – especially in like-for-like terms where growth has shown a marked improvement on the full year numbers reported back in June.

As well as facing competition from the mainstream grocers – many of which are now adept at persuading consumers to buy in bulk by offering volume linked discounts – Majestic must also contend with a range grocery-backed initiatives, such as Waitrose Cellar, which are designed to allow supermarkets play in the specialist wine arena. On top of this, while the current price war is not solely focused on wine, alcohol is one of key categories that grocers run headline offers on, meaning Majestic has to maintain a keen price position in order to compete effectively.

Majestic’s response to these challenges has been relatively solid. An initiative to grow its share of the lucrative business market has paid dividends with sales to corporate customers up 4.9%. Equally, its investment in technology and logistics, combined with a good click and collect offering, has helped it to boost online sales by 12.3% in this half – a substantial improvement on the growth numbers it posted back in June.

Neil Saunders, Managing Director of Conlumino Said ‘Going forward, a more focused communications effort, which has been aided by a detailed analysis of existing customer data, should help ease up both conversions and spend. There are some signs that this is already paying dividends with active customer numbers up 1.9% and average spend per transaction up to £130 from £127 in the same period last year. These are early, but positive, indications that the new marketing effort is bearing fruit.’

Whilst current performance is solid, Majestic will need to work harder in order to hold its own, especially so over the lucrative festive sales period. The grocers, including the discounters, are very focused on providing value for money through compelling headline deals on wine and champagne. This makes it especially important that Majestic continues to focus on quality wines, enthusing customers about wine quality and provenance, in order that it can avoid being pulled into a battle on pricing.

Last year, Majestic failed to set the champagne corks popping over Christmas, which pulled down its full year performance; this year it needs to ensure its festive sales go off with a pop, and not a fizzle.

Published on Monday 17 November by Editorial Assistant

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