Majestic buoyant after strong Christmas growth

08 January, 2014

Strong sales of South African Sauvignon Blanc and Argentinian Malbec drove a 5.9% rise in sales over the Christmas period at Majestic.

The chain announced that like-for-like sales – which do not include new store openings – were also up 2.8% in the 10 weeks to January 6.

Chief executive Steve Lewis told OLN that November was a strong month as each store in the 203-strong estate hosted a consumer tasting event.

He added that December started slow and then really ramped up in the two weeks before Christmas and in the run-up to the New Year.

Lewis praised his staff for the high levels of motivation they displayed when he was on store visits and added: “With the look of the stores and the energy of the staff, I would say it’s one of the best Christmases we have had.”

South Africa was up 26%, largely due to Sauvignon Blanc in the £6-7 bracket. Lewis said that is “because the quality of South African Sauvignon Blanc has really risen”.

Argentina was up 26%, driven by Malbec, while sparkling wine grew 15%.

Champagne was flat, but Lewis said Grand Marque Champagne performed well while consumers ditched entry-level in favour of Prosecco.

Sparkling wine from New Zealand and England also soared, according to Lewis.

The best selling white was Cloudy Bay Sauvignon Blanc, while the top red was a Vina Ardanzo Rioja Reserva, which retails at £23.50.

Fine wine – which Majestic defines at £20 and above – was the real success story, according to Lewis, after the retailer concentrated less on £30-plus bottles and more heavily on the £20-30 bracket, with a focus on classics like Barolo and Mersault.

Majestic opened its 200th store in Lewis’ home town of Petersfield – which he described as one of its most successful openings – and followed this up with three more in November and December.

Lewis said a further four will come in the final quarter of the financial year, with next openings in Kettering and Leighton Buzzard, bringing the total new openings this year to 16.

It expects to open another 16 next year and then continue at that rate for a further seven years.

It means that graduates joining Majestic can be an assistant manager within a year and run their own stores within two years, at the age of 23.

Lewis said he was looking for charming, articulate team players with plenty of ambition. 

"These people are all ambitious and I love fulfilling that ambition," he said. 

Despite the strong results and Lewis’ buoyancy, Majestic’s shares were actually down 1.8% at 538p.

Cannacord Genuity analyst Wayne Brown said its figures were “resilient” but not exceptional. “Whilst we would have hoped for a better performance, this is in line with expectations and we do not envisage changing our forecasts,” he added.

Panmure Gordon analysts Simon French and Karl Burns called Majestic’s Christmas trading performance “robust”.

They said: “With a slight slippage in the new store opening programme our full year sales forecast of 4.7% looks a bit optimistic and we expect consensus profit before tax to fall marginally from about £25.3 million to roughly £25 million.

“However Majestic remains a best-in-class operator with a sector-leading position.”

But Lewis said: “I think the City has reacted very well to the results. Some analysts have shaved their forecasts, but that’s because they didn’t shave them in November – they waited and shaved them now.”

He added that the chain can look forward to eight years of growth ahead of it and added that 50% of stores have the ability to double turnover, while fine wine, online and social media are core growth opportunities.

His top tips for 2014 are New Zealand, Argentina, the Loire and the Languedoc. 

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