Majestic Wine half year profits drop 50% following Naked Wines acquisition

While Naked Wines drove sales for the 26 weeks to 28 September, overall profits at parent company, Majestic Wine, dropped 50% due to on-cash charges relating to the acquisition of the online retailer in April.

Full year profits are also expected to be affected by its increased investments.

Half year group sales increase 36% to £181.6 million, while sales excluding Naked Wines only grew 6%, proving the long term benefit of the acquisition.

The retailer revealed a three-year transformation plan to "deliver sustainable, volume led earnings growth and improved return on capital". Majestic Wine is aiming for over £500 million in sales by 2019 through concentrating on new customer recruitment to drive higher returns, rather than new store openings.

New CEO, Rowan Gormley, has significantly reduced the retailer's store target from 330 to 230 – the current store estate stands at 211.

He said: "Six months in to my new job it is clear to me that we have a solid core business at Majestic, and two great growth engines in Naked and our Commercial business. We have a clear plan, which will require investment and take three years to complete, but will also deliver a better business that can create sustained growth in shareholder value.

"Fortunately, the Board acted decisively and quickly when it became clear that a change of direction was required, so our core competitive strengths are intact and provide a sound foundation to work from. As a result, profit for the current year is expected to be impacted by the increased investment derived from our successful test period after which we expect to see sustainable growth as the anticipated returns from our initiatives are realised."

As part of the new strategy Majestic also plans to reinvigorate sales in stores with a new and simplified pricing policy, including no minimum purchase, while improving customer experience in store and online.

Phil Wrigley, Majestic’s chairman, added: "We now have a first class team and a compelling strategy to create a real step change in the value of the business for our shareholders. The team has completed a thorough 'root and branch' review of the business, identified the key steps to be taken and the measures that will demonstrate our progress over the coming years. Alongside all this activity the new team has traded the business effectively."