Shares in Majestic Wine plummeted by more than 25% this morning after the company issued a profit warning, highlighting disappointing performances for Naked Wines in the US and for Majestic's Commercial division.

Majestic shares in sharp fall following profit warning

In an announcement to the London Stock Exchange, the business said trading conditions for its Commercial division had become ‘even more challenging’ in the first half of the current financial year.

As a result, sales were flat on the year and gross profit had declined, leading to an anticipated £2m drop in expected earnings for the year as a whole.

‘We need to find a better, more profitable approach for our Commercial operations as part of the group and, as a result, an internal review is under way,’ the company said.

Meanwhile, Majestic’s Naked Wines subsidiary had been hit by a failed direct mailing campaign in the US, leading to higher costs in the first half of the year and fewer new customers recruited.

The result, Majestic said, was that Naked Wines would make a small loss in the year, with expected earnings also falling short by £2m.

‘It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group,’ said Majestic chief executive Rowan Gormley.

‘We have always said that we would adopt a “test and learn” approach, and be quick to redeploy capital from under-performing areas, which is exactly what we are doing.’

Company remains ‘on track’

Gormley added that the company remained ‘on track’ to reach its target of £500m sales by 2019, and to resume the payment of dividends this year.

Majestic will provide a further update on the company’s performance at its interim results on 17 November.

The company’s share price had fallen by more than 25% at 11am GMT+1 today on the London Stock Exchange.