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Majestic at “crossroads” as it focuses on Naked Wines

Majestic Wine is in the advanced stages of selling the Majestic brand as it decides to concentrate fully on Naked Wines which the business believes has “greater potential for growth”.

Majestic said back in March that it would be rebranding to Naked Wines as part of its ongoing transformation plan, and has since decided a sale of Majestic is the best decision for the business.  

The retailer said it expects sale negotiations to conclude over the summer, but if it is unable to draw the sale to a close ahead of peak Christmas trading it will continue to run the two businesses and restart the process in 2020.

The group revealed a 6.3% increase in group revenue to £506.1 million, while profit before tax fell £8.5 million, compared to £8.3 million profit last year, put down to the investment in Naked Wines. Naked revenue grew 14.5% over the year ending 1 April 2019, while the company plunged £19.1 million into new customer investment – up from £5 million last year.

Majestic CEO, Rowan Gormley, said the retailer is at “a crossroads” in the company’s history.

“Naked has the greater potential for growth, and will deliver the best results for our shareholders, customers, people and suppliers over time,” he said. “Although we have several options to realise value from Majestic, the cleanest and best for customers, staff and shareholders currently looks to be an outright sale at this time.

“Majestic Wine started life with a disruptive model that challenged the status quo. Now is the right time to do it again under the Naked brand.”

Over the last three years of the retailer’s digital transformation project, it has almost doubled the size of Naked Wines, while over the previous year Naked reported repeat customer sales retention of 81%. Majestic pointed out how the economics of the subscription business puts Naked in a great position for growth as loyal customers have predictable spending habits and give the business “long term contribution growth in exchange for upfront investment”.

Majestic reported a solid sales performance over the last year, putting it in good standing for a sale, with retail reporting underlying sales growth of 1.5% down slightly from 1.9% last year, while its commercial arm increased sales 1.8% up from -5.6% in 2018. Gross margins, on the other hand, were lower, driving a reduction in profitability for the business.

Majestic also appointed former Argos boss, John Walden, to the position of chairman, bringing his online and in-store retail skillset, as well as experience in selling into the US which is seeing over 20% sales growth year-on-year for Naked Wines.

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