Profits at Majestic could fall by 36%

Profits at turbulent UK wine retailer Majestic are predicted to slide by more than a third to around £11 million this year, according to analysts ahead of the company publishing its results this week.

Rowan Gormley, CEO of Majestic Wines.

Although revenue at the company is estimate to hit £508.1 million in the 52 weeks to 1 April 2019, up from £476.1 million last year, its adjusted profit before tax is expected to slide from £17.2 million last year to £11 million this year, a fall of 36%.

The share price has fallen from 480p at its height last July to 282p this morning, a fall of more than 40%. Following the shock announcement of a new strategic direction  on 25 March which would see it close retail stores and rebrand as Naked Wine to concentrate on its online and international business, the share price fell to its lowest point in five years at 219p.

Last month (21 May) the company responded to media speculation to confirm it was exploring a range of options to release capital from the retail and commercial business, including the combined sale of its retail and wholesale operations.

Potential buyers linked to the retailer include the owner of defunct tech retailer Comet, OpCapita and US investment giant Fortress, Sky News reported last month.

Commenting as it converted its first Majestic store to a Naked store, a Majestic spokesman told db that “all options remain on the table, including closures, sales and transitions.”

More information is expected when the group publishes its full year results this Thursday (13 June).

At the time of the announcement, CEO Gormley had insisted the recently transformed Majestic business had “the potential to be a long-term winner” but told db that the future of retail was increasingly about “an experience rather than flogging wine”.

“I think it’s entirely feasible [the future of retail] will be pop-ups and concessions and tasting cards at festivals rather than a 3,000 sq ft [warehouse on an] industrial estate,” he told db.

Analyst predictions do show a longer term uptick, however, with adjusted EBIT set to rise to around £16.9m in the year to March 2021, with revenues  estimated to hit £575.7 million.

According to the Irish Independent, analyst firm Liberum has valued the retail and commercial business at between £110 million and £130 million, but reportedly said anything between £75 million and £100 million “should be seriously considered”.