Majestic Wine has said it plans to close some of its stores in the UK and rebrand itself under the Naked Wines banner as part of a major ‘transformation plan’.
Majestic’s share price dropped by 10% in early trading on the London Stock Exchange today (25 March), following its announcement.
While the retailer said that pre-tax profits for its current financial year remained on-track to meet analysts’ forecasts and that it expected to hit its £500m sales target, it said that it wanted to take greater advantage of online and international sales potential under the Naked Wines brand name.
Majestic will be renamed ‘Naked Wines plc’, it said, adding that 45% of its business was from online sales.
Chief executive Rowan Gormley said that transformation plans were ‘well advanced’ and that full details would be released in June alongside the group’s full-year results announcement.
Majestic did not specify how many stores have been earmarked for closure. Some stores would be ‘migrated’ to the Naked brand, it said.
Asset sales and store closures would help to raise investment funds for the Naked business, it said, adding that it would attempt to minimise job losses by transferring staff to the new-look Naked Wines where possible.
The group said it expected to report £10m of ‘non-cash restructuring charges’ in its current financial year.
From next year, the group said that it could face ‘substantial cash restructuring charges’, but it said that asset disposals should cover these costs.
The group said, ‘Regardless of which route forward we take, our current expectation is that we can release capital from Majestic without erosion of shareholder value; and the one-off costs of exiting retail stores can largely be recouped through asset disposals.’
So-called ‘new customer investment’ at Naked Wines will rise from £20m per year to £26m annually from the next financial year, said the company. It added that it expected investment to rise further in future.
Gormley said, ‘It is clear that Naked Wines has the potential for strong sustainable growth, and we will deliver the best results for our shareholders, customers, people and suppliers by focusing all our energies on delivering that potential.
‘We also believe that a transformed Majestic business does have the potential to be a long-term winner, but that we risk not maximising the potential of Naked if we try to do both.’
Majestic bought Naked Wines in a £70m deal in 2015. The takeover saw Gormley, the founder of Naked, become CEO of the newly combined group.
The Naked side of the business has doubled in size since the takeover, said the firm, with sales to set to hit £175m in its current year. It also highlighted Naked’s growing sales network beyond the UK, particularly in the US and Australia.