Tech investment aiding Majestic Wine sales growth

The CEO of Majestic Wine, Steve Lewis, reiterated today that the retailer's 2015 financial year is a period of investment to "put in place the building blocks to deliver future growth and shareholder value".

His comments came as the business announced that total group sales for the 26 weeks to 29 September 2014 were up 2.8% year on year to £133.8 million, but group profit before tax was down £1 million to £8.5 million.

Majestic said it has increased its market share by 0.1% to 4.3%, while like-for-like sales in its UK retail stores were up by 2.8%.

Much of the investment Lewis alluded to today is in support of the business's aim to grow as a multichannel organisation, with the company merging multiple data sources to help create a single view of our customers, no matter where they choose to make a purchase. Majestic is confident that this has resulted in more efficient segmented email marketing communication.

Meanwhile both the commercial and multichannel teams at the company are growing, and its distribution centre was successfully relocated, in July, to a larger and more modern facility in Hemel Hempstead.

Key strategic initiatives at the company include increasing its online sales, developing more commercial relationships and boosting revenue from fine wine, which is classed as bottles priced £20 and above – and progress reports were offered on all of these targets in today's interim trading statement.

Online sales in the half-year increased by 12.3% to £12.9 million and now represent 10.8% of UK retail sales, while sales to business customers were up 4.9% to £26.8 million. Fine wine sales were up 22% to £9 million, helping boost margins, while four new stores were opened in the six-month period.

These areas of growth come as the rapid expansion of the supermarkets over the last decade has put pressure on specialist wine retailers to compete against the convenience of purchasing alcohol as part of a weekly grocery shop.

This trend has helped put a number of high street wine specialists out of business in recent years, including Threshers and Wine Rack. At a time when the supermarkets are once again using low prices to draw customers into their stores, it seems clear that competitive pressure will mount yet further on the remaining UK wine merchants.

Seemingly not when it comes to Majestic Wine, according to independent retail analyst Nick Bubb, who suggested in his 'The Daily Retailer' email that things are on track for the Hertfordshire-based retailer.

"If you’re looking for a victim of the supermarket price war, then Majestic Wine always looks a suitable candidate, given the plethora of cut-price wine offers available in the supermarkets," he explained.

"But it must be doing something right, because today's interim results show that LFL sales were up by 2.8%, which is more of a Waitrose than a Tesco-like performance. Unfortunately, PBT is down from £9.5 million to £8.5 million, but at least this was expected and so CEO Steve Lewis claims that things are going to plan."

Majestic recently requested some of its suppliers to help fund its new warehouse by paying an extra 4p on every bottle sold – a move that shows the business is focused on cost efficiency but a decision that has reportedly upset a number of its winery partners, as well as giving its competitors ammunition for public criticism via the media.

In today's statement to the City, however, CEO Lewis was clear about the company's current path.

"Majestic has a compelling proposition with a differentiated model, strong customer service ethos and a clear strategy to deliver growth," he noted.

"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."