Majestic Wine (LON:MJW) , the UK's largest wine warehouse chain, announced excellent set of results for the 26 weeks ended 27 September 2010.Some have questioned the ability of the group to keep growing in its UK heartland but these interim results look truly exceptional. On total sales up 10.2% to £117.6m profit before tax increased by 20% to £7.3m and diluted earnings per share were up 17% to 8.2p. The interim dividend was lifted 17.9% to 3.3p with the forecast annual yield c3.3% at the current share price. We are highly impressed with the headline numbers with like for like sales in UK retail stores up 7.6%, active customers, up 14% to 496,000 and online sales up 8.3% on last year and now representing 9.1% of UK retail sales. The latter is surely where further gains can be made.The Group’s Lay Wheeler fine wine specialist supported growth in the sale of fine wine with sales of still wine priced at £20 and above increasing by 20.2% on last year.During the period two new stores were opened in Redhill and Windsor and since the period end they have opened stores in Totnes, Ashbourne, Bracknell, Canterbury, Cobham and a second store in Cardiff. Majestic now operates from 160 stores in the UK with the aim of enlarging this to at least 250 locations.
The results vindicate the group’s decision taken in September 2009 to reduce the minimum purchase requirement to six bottles rather than twelve.Through its Lay Wheeler fine specialist it enjoyed considerable success selling en primeur wines from the highly regarded 2009 Bordeaux vintage. Management has drawn attention to the fact that the sales the campaign generated and the costs of the product are not reported in the income statement until the wines are delivered to customers. But conversely, the costs associated with processing these sales have been reported as they have been incurred. In total cumulative profit of £2.2m on revenues of £13.5m has been deferred to future accounting periods, representing the current 2009 Bordeaux and wines from previous campaigns not yet delivered to customers. These sales and profit will be reported in the 2012 and 2013 financial years. The ‘en primeur’ business introduces a few strange lines into the balance sheet! Given these sort of numbers could Majestic be considering the acquisition of another fine wine specialist or two?In…
