Corks pop at Majesticas yearly profits soar
Tuesday 14 June 2011
The rise of wine-lovers flocking through Majestic Wine's doors sent profits soaring last year as it took advantage of problems at its rivals, and yesterday outlined a 10-year expansion plan.
Majestic's profits rose 27 per cent to £20.3m in the year to the end of March, with its chief executive Steve Lewis hailing a "really good set of numbers".
The decision to reduce the minimum purchase from 12 bottles to six in 2009 was the crucial factor behind "changing the company's dynamic", he said, adding: "The existing customers are shopping more regularly and the shops are more accessible to new customers." Sales were up across the business, with the company delighted by the 10 per cent growth online, as well as an almost 24 per cent bump in sales of fine wine.
The number of customers who have made purchases in the past 12 months has risen by 8.2 per cent to 511,000. The average spending, however, was 2.5 per cent lower at £126, as a result of the reduction of minimum purchase, although the company pointed out that transactions rose 12 per cent to 2 million.
The strong performance comes at the expense of its rivals, as Mr Lewis said demand across the whole market was almost flat. The supermarkets were Majestic's main competitors, he said, but the company has benefited from the collapse of First Quench, the owner of Threshers and Wine Rack, in 2009. And this year another major rival has called in the administrators.
Mr Lewis said Majestic had not seen the "Oddbins effect" in its results as the administration came after the end of its financial year, but added: "It should help us this year."
While others struggle, it has unveiled a plan to almost double the existing number of stores in a decade. It opened 12 last year, bringing the total to 165, and has decided to expand further. Mr Lewis said management had already identified the sites that will take the stores up to 330, but will roll out the new stores slowly. "The time and cost to train new staff is very high, so we couldn't open all at once," he said.
The most popular wine "by far" last year was New Zealand sauvignon blanc, Mr Lewis said, adding that sales from the country now made up 20 per cent of the total still wine volume.
One category the chief executive picked out as enjoying extraordinary growth over the past year is sparkling wine, especially prosecco from Italy. "UK consumers are very savvy," Mr Lewis said. "If the choice is cheap champagne and very good sparkling wine, people are tending to go for the wine."
Spanish and Argentinean wines also experienced strong sales growth.
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