(recasts, adds chief executive comment from conference call)
LONDON (Thomson Financial) - Majestic Wine Plc. said wine prices are
expected to rise by around 10 percent this year as duty increases and the strong
Euro drive up the cost to the consumer.
In a conference call this morning, chief executive Tim How said wine prices
have increased by around 5 percent over the past six weeks, with most prices
from Europe having risen up by closer to 10 percent.
"Over the year, we will see prices rising by around 10 percent unless we see
the pound strengthening again, which would be great and would allow us to reduce
our prices again, but I'm not forecasting that," said How.
As a result on the pressures, the price of a five-pound bottle of wine has
moved to 5.50 pounds, with the Euro weighing more heavily on higher-priced
wines. How said wines previously retailing at six and seven pounds a bottle have
gone up by around one pound.
How said Majestic has responded by increasing the level of targeted consumer
communication to back up promotional activity and said the group has not really
seen an fall-off in volumes. He added that gross margins for the year were up
slightly as the group passed the responsibility for promotional spend back to
its suppliers.
Majestic today unveiled full-year pretax profit up 3.4 percent to 16.7
million pounds and said like-for-like sales in the ten weeks to June 9 continued
to grow by 0.8 percent. The group added that like-for-likes have risen up 4.4
percent in the last six week thanks to improved trading since April.
Majestic's performance at its Wine and Beer World stores in France's coastal
ports deteriorated as the strong Euro contributed to a downturn in profits and
rising fuel and travel costs kept consumers in the United Kingdom. The group
said full-year profit before tax declined 0.3 million pounds to 1.5 million
pounds, with same currency like-for-like sales down 8.8 percent.
While How noted the widening duty differential between the United Kingdom
and the continent, which now stands at about 1.70 pounds on a bottle of still
wine, he said the business is "not anticipating a strong first half".
"We would hope to stabilise the business at its current level," he said. "I
think at the moment, I don't see it becoming a growth part of our business."
Majestic said it added ten new stores in the year to end-March and re-sited
three of its stores, with an additional site opening tomorrow taking the total
number of stores to 145.
How said the group hopes to open nine or ten new stores in the current year
and will continue with its re-siting programme.
"We can clearly see the potential for around 200 stores and I think a few
more than that in reality," he said, adding the group has scope for around five
years of growth at current rates.
Majestic said its Ecommerce sales also continue to grow strongly and now
represent 7.9 percent of total UK retail sales.
The group confirmed that chief executive Tim How is to retire after the
group's forthcoming AGM, to be succeeded by chief operating officer Steve Lewis,
who joined the company in 1985 as a graduate trainee manager.
At 9:50 a.m. shares were flat at 198-3/8 pence.
Majestic declared a full-year dividend of 9.8 pence, up 15.3 percent on the
previous year.
simon.meads@thomsonreuters.com
sjm/ejp/sjm/ejp
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