Soaring gin and sparkling wine sales helped Majestic Wine outperform City expectations to deliver its “biggest ever” Christmas.
Majestic said gin sales were up 55% on last year, with upmarket products such as Warner Edwards rhubarb gin and Sipsmith sloe gin performing particularly well. Sparkling wine sales rose 12%, with sales of prosecco increasing three times faster than champagne.
The retailer, which also owns the Naked Wines website, said sales at established Majestic Wine stores were up 7.5% in the 10 weeks to 2 January. Sales rose nearly 30% at Naked and 62.3% at the fine wine specialist Lay & Wheeler, putting overall group sales up 12.4%.
Analysts had feared Majestic would not achieve its expected sales growth of 6% after the company issued a profit warning in September because of a failed marketing campaign in the US and weak sales to business customers.
Shares rose by more than 6% to 345.5p on the strong sales figures.
Rowan Gormley, the founder of Naked Wines who became Majestic’s chief executive after the two companies merged in 2015, said the retailer’s transformation plan was working, adding that it was on track to achieve its goal of £500m in annual sales by 2019.
The pace of growth over Christmas was an acceleration from the 5.7% reported for the six months to 26 September and came on top of a strong performance last Christmas when sales rose by 7%.
The success was partly bought at the expense of a 1% cut in gross profit margins against last year as the company said it had recognised the need to “remain competitive in a heavily discounted UK market”.
David Jeary, an analyst at Canaccord Genuity, said the statement was bit of a “curate’s egg.”
“It worries us that the group in aggregate, given its superior delivery of customer services in general, cannot extract any pricing premium with consumers,” he added. “Indeed, it has to bear the higher costs of superior service while competing head-on in price terms with supermarket competitors, which see wine [and spirits] primarily as promotional footfall drivers in peak trading periods.”
Sarah Johns, an analyst at Verdict Retail, said Majestic had been right to take on the discounters such as Aldi and Lidl, which have been making heavy gains in alcohol retail. She said value-for-money drinks offers, voucher marketing to encourage spend and free standard delivery for just six bottles had worked.
“With Christmas trading making up almost a third of the retailer’s annual sales, it was important that Majestic performed well,” she said. “The retailer’s decision to compete with discounters on price resulted in a marginal fall in gross margins. However, this move was ultimately the right one as savvy consumers looked for the best deals on drinks and Majestic’s offers proved alluring.”
