Majestic profit slump blamed on Champagne sales and strong euro
June 17, 2009
By Adam Lechmere
Majestic Wine's profits fell by more than 50% in the last year - the result of falling Champagne sales and the poor performance of its French business.
Pre-tax profits fell by 55.8% in the year to the end of March 2009 to £7.4m. Like-for-like sales were down 2.7%.
Sales to businesses declined by 7.5% last year and Champagne -18% of Majestic's total sales - was down by 24%.
Chief executive Steve Lewis told decanter.com the fall in sales was in large part due to the business sector.
Sales to restaurants, he said, were level last year, and private customer sales were down by 7%.
Lewis said like-for-like sales were up 2% in the period from 30 March to 8 June, boosted by the good weather and returning consumer confidence.
While Champagne sales fell off, Majestic saw a boom in Prosecco and sparkling wines, particularly from New Zealand. That sector rose by 20%.
'People are buying Champagne for personal use, and sparklers for corporate events and bigger private parties,' Lewis said.
He blamed the poor performance of the company's three stores in northern France - which made £443,000 profit last year - on the strong euro and the fact that so many French products were now as easily available in UK supermarkets as in France.
'The romance has gone out of travelling to the continent for a day trip. The average spend was £350 - and that's a lot in a recession. And France is now perceived as expensive with the strength of the euro.'
Majestic opened its 150th store in Edinburgh yesterday and will open eight stores this financial year.
At the same time Lewis stressed he was 'committed' to the French operation.
He told decanter.com he was confident an inevitable fall in the value of the euro and a VAT hike in the UK in January - which would mean a £2 duty difference between the UK and France - would bring customers back over the Channel.
He also said the acquisition of fine wine merchant Lay & Wheeler, which was completed in February this year, was a success, with an 8% growth in fine wine in the year to March. 'The fine wine proposition will achieve good growth,' he said.
Majestic is continuing its trial of six-bottle cases, in seven stores across the UK. In all stores except one the minimum purchase is 12 bottles. Lewis expressed 'cautious approval' that reducing the minimum order would work, 'but we need to be absolutely clear what impact it has before we roll it out across the business.'
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