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Majestic Wine plans store closures

Majestic Wines, the high street darling of the UK wine drinker, has announced this week that it plans on shutting and selling its wine retail business.

Majestic Group includes the Majestic Wine retailer, fine wine merchant Lay & Wheeler and online retailer Naked Wines. CEO Rowan Gormley this week announced plans to split the company up. Selling Lay & Wheeler and Majestic to release as much capital to grow the Naked Wines business.

Majestic Wines the retailer has around 200 stores with 40 properties being freehold. This week Rowan suggested some will be sold off as Majestic stores, some will be re-branded as Naked Wines and some of the 40 freehold properties could be sold and converted into flats.

The latest figures released show that 55% of the company sales are from stores, with 45% from online across the Majestic, Lay & Wheeler and Naked Wines brands. The whole of the retail division netted sales of £264m in 2018 and an operating profit of £13.3m. Its commercial business clocks sales of around £43m, with an operating profit of £2.4m. No profits are available for Naked Wines but sales for the business are now £175 million. Senior management have been focused on building Naked Wines and profits for the Majestic retail have dropped from £20 million in 2015 to £10 million this year under Gormley’s leadership.

The growth for the company has come from the USA with 19.5% growth in the last year. In the past much of the investment in the US had been wasted acquiring expensive customers that were not profitable for Naked Wines. However they appear to have turned the corner and now claim they are acquiring the right type of consumer.

Talking about why the change, Gormley said to Drinks Business magazine “The strategic logic was that Majestic was generating cash and Naked was consuming cash. One of the fundamental things that’s changed is that Naked is no longer consuming cash, so the need to have those two companies together no longer exists. If you look at results for last two years, the pattern is well established. Online sales are growing at 20-30% and offline sales are shrinking, so what we’re doing with stores needs to change.”