Companies: MJW   

The retail slowdown has finally left a dent in wine warehouse merchant Majestic, as interim sales grew at a slightly more leisurely pace than last year. However, the business is still growing and Majestic has a 3% share of a UK wine market growing at 6%.

The half-year to end-September saw UK like-for-like sales swell 5.5%, down from the 8% of the same period last year and the 8.3% from the full year to March. Profits before tax and exceptionals rose by 18% to £5.9m on sales of £80.8m as customers spent an average of £5 more per transaction at £115 and 43% more on expensive fine wines.

Its database of customers, to which Majestic sends regular price lists and offers, grew 8% to 364,000. Orders received via the website increased 43% and now represent 4.9% of UK sales in the period. Chief executive Tim How stresses that marketing is extremely important to the company, pointing out that ‘if we were not promoting as frequently as we are we wouldn’t have seen this 5% growth’.

A tighter grip on costs helped drive some of the improvement and the issue of rising fuel costs, which seems to be a major concern to other high street players, does not weigh heavily weigh as Majestic’s minimalist depots do not spend ‘anything’ on heating.

Two new openings in the half, plus one since then and a fourth by the end of November will bring the total up to 125 stores in the UK. An additional eight warehouses are intended for the next financial year, even though How complains that getting planning permission is ‘quite challenging’.

Like-for-like sales continue to be ‘robust in a challenging market’, up 5% for the six weeks to 7 November, and house broker Teather & Greenwood forecasts £14.5m of pre-tax profits for the full year, a ten per cent increase. The ensuing earnings of 14.9p per shares, producing a premium p/e ratio of 19.1. Hold.