Majestic Wine insisted this week its turnaround plans remain firmly on track despite plunging to a first-half £4.4m loss.
The first half of its post-Naked Wines merger rebound efforts seemed to be going to plan, with Majestic’s retail operations jumping to 5.7% like-for-like growth amid a 0.1% increase in customer numbers, which helped overall sales rise 13.2% to £205.6m in the six months to 26 September.
The rather large fly in the figurative glass of Shiraz is it is not making any money. Despite 26.7% growth in Naked Wines, a disastrous US direct marketing campaign and weak commercial sales growth of just 1.2% meant adjusted profit before tax was just £0.1m, while headline pre-tax profit of £4.3m last year swung to a £4.4m loss.
Majestic took the unusual step to reinstate its dividend despite the loss and the shares jumped 4.7% to 316p on Thursday morning, but analysts kept the Champagne on ice. Canaccord Genuity said: “With uncertainty on the pricing environment, substantial inventory build and increasing net debt, risk is weighted to the downside in our view.” Edison Investment Research noted upbeat management guidance, but added: “Investors could be forgiven for less confident and waiting for evidence before popping corks.”
Elsewhere, it was another good week for Tesco as an HSBC upgrade and the latest Kantar Worldpanel market share data kept the recovery story on track for investors. HSBC analyst David McCarthy called Tesco the “long-term winner” in a note on Monday, which upgraded the stock to ‘buy’. Kantar revealed on Tuesday that Tesco had grown at its fastest rate in three years in the 12 weeks to 6 November, with sales increasing by 2.2%. Shares leapt 9.5% over the two days to 217.2p - up more than 45% for the year.
Online rival Ocado crumbled 9% on Wednesday to 257.3p as Morrisons unveiled a new store-pick service using Amazon Prime. The supermarket’s Morrisons at Amazon in selected postcodes in London and Hertfordshire is offering one-hour delivery for £6.99.
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