Connoisseurs help Majestic overcome summer gloom

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The Independent Online

Britons' growing appetite for more expensive vintages helped Majestic Wine to ride out the poor summer weather, the UK's largest wine warehouse chain said yesterday, as it posted first-half profits of £7.5m, an increase of 16.7 per cent on the same period last year.

Majestic said sales of fine wines were particularly strong, with revenues from bottles priced at £20 or more up 17.5 per cent. The average price per bottle of wine purchased at Majestic climbed to £5.85, up from £5.66 last year. Sales through the company's website also rose, up 22 per cent on last year.

Its chief executive, Tim How, said the group was planning to capitalise on the success of this segment by setting up new fine wine areas in its existing stores. The service will be available in 38 stores by Christmas, and will be introduced in a further five stores in the first quarter of 2008.

Majestic's enthusiasm for fine wine reflects a growing willingness among UK consumers to buy more expensive bottles. According to the research firm AC Nielsen, the market for bottles costing in excess of £5 is growing at the rate of 25 per cent a year on year, five times the growth in the wine market generally. The average price of a bottle has also increased in recent years, up from £3.99 in 2005, to £4.15 in the past 12 months.

Majestic's focus on fine wines has enabled it to outperform despite a difficult trading environment. Its chairman, Simon Burke, said that unexpected summer weather had led to an "unusual sales pattern during the first half". He added: "Sales were good until mid-June but then slowed until the end of July. Trading strengthened from the beginning of August."

Other wine retailers have not fared so well. Oddbins, the wine retailer owned by France's Castel Frères, last week reported full-year losses of £8.6m.

Mr How said he was also confident about the upcoming festive period. "We're well-prepared for the Christmas season," he said, "It's an important period and we're approaching it with cautious optimism."

However, Wayne Brown, an analyst at Altium Securities, warned that Majestic remained at risk of a squeeze from larger rivals. "They will have to work hard during the Christmas period owing to the aggressive discounts offered by the large supermarkets," Mr Brown said. "There are also some consumer spending concerns this time."

Sanjay ......... Vidyarthi, at Dresdner Kleinwort, expressed similar concerns. "They are doing well but the current trading period is still a challenge. It's been a tough first half for them with the weather affecting the summer barbecue season."

Shares in Majestic ended down 9.5p at 325p, valuing the business at £204m.