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Majestic Wine shocks investors with plan to ditch physical shops
Retailer Majestic Wine (WINE:AIM) has announced a radical new transformation plan that could potentially see it become a pure online player, prompting analysts to downgrade earnings and sending its share price lower.
The company is to ramp up investment behind its online Naked Wines business which it acquired in 2015 and adopt that brand as the new group name. It will spend an extra £6m a year, taking total annual investment to £26m.
Restructuring charges will scar financial results going forward and it looks like dividends will be cut given the increased investment ahead.
The new strategy will be funded through asset sales and store closures. It is even actively seeking a buyer for the whole of the Majestic side of the group which covers the Majestic Wine retail chain, the commercial arm and the fine wine merchant Lay and Wheeler.
Peel Hunt says: ‘It’s inevitable that stores will close, and if a taker of the chains as a whole can’t be found then the shuttered number will be large.’
The stores could be sold off in parcels should Majestic fail to find a buyer for the lot. If that proves problematic, some outlets could be rebranded as Naked, since roughly 10% of Naked Wines sales are currently collected at Majestic stores.
Shore Capital comments: ‘It remains to be seen how much appetite there will be in the wider retail market for a chain of circa 200 wine warehouse stores but we note that Majestic is a well-known brand with a good client base. We wonder if it is a buyer’s market following Oddbins’ recent administration.’
Majestic said last November that nearly 45% of its business was online. At the time the company remarked that ‘physical retail has a long-term future, but it will need to evolve into a much more experiential component of a multi-channel experience’.
Peel Hunt says the decision to now focus solely on Naked isn’t a complete surprise, saying it had always been clear that the brand was ‘the favourite’ within the group.