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magazineWhy our bullish call on Majestic Wine turned sour
Majestic Wine (WINE:AIM) 301.5p
Loss to date: 20% (stopped out)
Original entry point: Buy at 433.5p, 9 Aug 2018
Unfortunately, our bullish summer call on quality wine specialist Majestic Wine (WINE:AIM) hasn’t worked out, the shares triggering our stop loss on news (22 Nov) of a 63% decline in half year adjusted pre-tax profit to £2.5m.
Our hopes that the extended summer heatwave would boost sales at the Watford-headquartered retailer were too optimistic, and forecasts have been materially downgraded to reflect challenging market conditions for the Majestic Retail and Commercial businesses and the higher costs of growing the Naked Wines arm.
Chief executive Rowan Gormley insists Majestic is ‘doing well in a tough market’ and says the business is on track to meet a £500m sales target in the 2019 financial year.
However, the UK retail business is facing a sluggish domestic market and increased investment behind Naked will impact profit near-term.
Full year EBIT (earnings before interest and tax) from Majestic Retail and Commercial is also now expected to be ‘at best flat year on year’, versus previous guidance for growth.
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