Majestic Wine, the wine warehouse chain, is suffering a hangover after its full-year profits slumped by more than 50 per cent, hit by a sharp fall in "booze cruises" to its outlets in northern France and in sales of champagne to corporate clients in the UK.
But the retailer, which sells wine in cases of 12 bottles, said the average price of a bottle purchased in the past 12 months had increased, and its sales had rebounded since the end of 2008. Majestic, which has 150 stores, said its pre-tax profits fell by 55.8 per cent for the year to 30 March, to £7.4m, after it took a £5.3m impairment charge from writing down the value of its French business, Wine and Beer World.
Steve Lewis, the chief executive, said: "[Our] three stores in northern France traded very poorly last year and that is because of the strength of the euro. The romance has gone out of travelling to France and we have seen a direct impact on our French business."
Excluding the French writedown, Majestic's underlying pre-tax profit fell by 22.3 per cent to £12.7m. The retailer has moved some staff back to Britain and closed its distribution centre in Calais, but will serve the French operation from its biggest store in France. It insisted that it remained committed to the French business.
For the year to 30 March, Majestic posted a 2.4 per cent increase in total sales to £201.8m, but underlying sales – stripping out the impact of new stores and space – declined by 2.7 per cent. Sales of champagne to business customers tumbled by 24 per cent. Mr Lewis said: "We saw a major fall of sales from the middle of last September almost about the time Lehman Brothers went down ... and particularly sales of champagne almost disappeared."
Sales to corporate clients account for about 25 per cent of Majestic's total turnover. Mr Lewis added: "We are assuming that corporates will not go back to spending [this year] because finance directors have put a big red line through that spending, and quite right too."
While sales of champagne to business clients fell, sales of sparkling wine to private customers rose by 20 per cent as they traded down. Mr Lewis said wine sales had "held up well" as customers switched to New World wines from Argentina, New Zealand and South Africa and away from more expensive Italian and French brands from the eurozone. Majestic was also able to toast a 6 per cent increase in the average price of the bottles of wine it sold during the year, from £5.98 to £6.35. The retailer said UK like-for-like sales rebounded by an "encouraging" 2 per cent between 31 March and 8 June, helped by the good weather and recovering confidence among shoppers.
The chain opened its 150th store in Edinburgh yesterday and plans to double its store opening programme to eight this financial year. Majestic paid a final dividend of 7p a share, maintaining its total dividend at 9.8p a share.
Mr Lewis said: "The UK's love affair with wine shows no sign of abating."