Majestic Wine’s shares tumbled after the chain said it was forced to slash prices over Christmas and warned that competition would remain fierce.
In a trading statement, the wine merchant said sales at stores open at least a year rose by 1.1% in the past 10 weeks. The performance was a sharp slowdown from the 2.8% growth in the six months to the end of September and required the group to cut its profit margins.
Majestic shares fell 13% to 346p in early trading on Wednesday. They have lost more than a third of their value in the past year.
The company said it had to offer more promotions to compete with supermarkets and attract customers in store and online. Majestic’s woes suggest it is partly a casualty of the growing price war between the major supermarkets trying to combat discounters Aldi and Lidl.
Steve Lewis, chief executive of the wine merchant, said: “Majestic delivered like-for-like sales growth of 1.1% in a difficult Christmas trading period characterised by promotional activity and we are now focused on delivering our final quarter’s trading. We anticipate this competitive pricing environment will continue throughout much of 2015.”
Estimates for pre-tax profit have been revised down by 6% to £23m in the year to 31 March and by 8% for the following year by Investec, its house broker.
Investec analyst Kate Calvert put her “buy” recommendation for Majestic shares under review. In a note to investors, she said: “2015 was always flagged as a year of infrastructure investment. However, with yet another downgrade, strategic concerns and a question over growth prospects [are] likely to weigh on the share price.”
The trading update is the latest disappointment for Majestic investors. It issued a profit warning last March and blamed tax increases and bad harvests for flat annual profits in June. In November, the company was more upbeat as it reported trading in line with forecasts and predicted gains from investment in technology and customer data.
