Majestic Wine has warned that profits would be below expectations in 2017, due to a costly and ineffective marketing campaign for its Naked Wines launch in the US and challenging trading in its commercial arm.
However, the alcohol retailer said that it remained on track to achieve its three-year target of £500 million in sales by 2019.
In its latest trading update, Majestic Wine said it was reviewing its commercial division after seeing sales plateau and add pressure on its profit.
It said the first half of its financial year turned out to be “challenging” and warned that revenue could be around £2 million lower than expected.
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In addition, it warned that its Naked Wines online business – acquired in April last year for £70 million – would be hit with a loss after a direct mail campaign in the US that flunked.
Majestic Wine added that overall group revenue for the year to April 3, 2017, would come in lower than City expectations.
“It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group,” chief executive Rowan Gormley said.
He said that despite the challenges faced by the retailer’s commercial arm, turnaround was bearing fruit in the retail arm, which had its first like-for-like sales growth in four years for the 12 month period to March 28.
He also said the company was still on track to hit £500 million in sales by 2019 and planned to resume shareholder dividend payouts later this year.
Majestic Wine has 210 stores across the UK as well as two in France, while Naked Wines operates across the UK, the US and Australia.