Shares in specialist wine retailer Majestic Wine (WINE:AIM) are slowly recovering from their severe hangover following a savage September profit warning.
Half year results reveal a forecast-busting 5.7% surge in like-for-like sales in the core Majestic Retail business, providing evidence CEO Rowan Gormley’s new strategy is working.
The company also reiterates its goal of delivering £500m in annual sales by 2019.
That news sends the stock up 5.1% to 317p.
Shares in the retailer had sold off sharply when Gormley uncorked an earnings alert two months ago.
That event indicated full year profit would be £4m lower than originally anticipated due to a failed direct mail programme in Naked Wines USA and ongoing struggles in the Majestic Commercial unit.
Results for the six months to 26 September now reveal a swing into the red, largely due to Naked Wines-related costs.
Risks remain, since Majestic is only one year into a three year transformation plan to morph from a staid, store-based UK wine-seller into an international, multi-channel, multi-proposition business
TOP LINE FIZZ
‘Our plan is working,’ insists Gormley. ‘We said that we would deliver sustainable growth, not by opening more stores, but by investing in better customer service and better customer retention. Both of these are working.
‘Sales are up over 10% and the projects driving that sales growth, like nationwide next day delivery, are on time and on budget. Now that we have built a solid platform for future growth, future cost growth will be much lower.’
Half year results reflect the first full period where growth is not being driven by opening stores, but rather by investing in acquiring and retaining customers.
Majestic Retail’s same-store sales grew for the sixth successive quarter, driven by 9.1% growth in active customers to 820,000, giving grounds for encouragement ahead of Christmas.
Both its fine wine merchants Lay & Wheeler and Naked Wines delivered stellar growth, though the performance in the Commercial division was disappointing.
Despite the well-publicised failed direct mail programme in the US, pure-play online retailer Naked Wines grew sales by 26.7% to £59m, serving to remind investors of the growth potential in Majestic’s future growth engine.
DIVIDEND RETURN
Encouragingly, Majestic also declares an interim dividend of 1.5p, in line with the policy to pay out 35% of adjusted post-tax earnings for the full year.
The return of the shareholder reward shows management’s confidence that cash generation and profit will rise in the second half.
