Majestic Wine’s shares fell on Friday as Canaccord Genuity reiterated a ‘sell’ rating and cut the target price to 290p from 350p.
The company last Wednesday issued a profit warning, saying it had been hit by the costs of a failed marketing campaign for its Naked Wines business in the US. Majestic said weak growth in its commercial division, which sells wine to businesses, had also weighed on results.
“Majestic Wine delivered an unwelcome downgrade of £4m to fiscal year 2017 pre-tax profit expectations, equating to a around 25% cut to previous consensus forecasts,” Canaccord said.
“Despite the company's understandable attempts to reassure investors on the progress in all other parts of the business, the fact that the two culprits - commercial and Naked USA - have been positioned as growth drivers is clearly a source of considerable disappointment.”
Canaccord said while management has been targeting double digit growth in commercial, gross margin of 200 basis points in the year to date has seen the top line resolutely flat. As a result, Majestic said this will deliver a £2m hit to earnings before interest and tax in the rest of the year.

Peel Hunt today upgrades its investment rating on Majestic Wine PLC (LON:WINE) to hold (from sell) and raised its price target to 380p (from 300p).

Why Naked Wines mail order promotion failed in the US:

https://digiday.com/uk/uks-naked-wines-us-marketing-push-flopped/

Peel Hunt details:
"Our meeting with Majestic management was encouraging on two counts. Naked Wines is intending to return to historic levels of marketing spend. This is likely to boost the top line but hold back medium-term profit growth to a degree. More importantly, the group as a whole is facing down the industry headwinds satisfactorily. It’s not time to call for a dramatic rerating of Naked as it is still to fully come off the naughty step after the direct mail error in the US. And there are still fundamental questions to answer in the core retail business. But forecast momentum is probably flat, not negative, and thus we are closing our bear and moving EBIT nearer to consensus.
Alongside our nerves on core retail’s profit momentum, we were also concerned by the apparent lack of opportunities to grow the Naked Wines business. Direct mail ultimately didn’t work in the US, and management has taken a step back in marketing spend in H1 as new personnel beds in. Of course that means that profitability improves, especially as it appears that the contribution from the mature Angels has continued to grow. H1 will thus be flattered in profit terms (Naked will make a profit, not a loss this year) but of more fundamental importance is the potential for investment to recommence at Naked, especially in the US. We understand partnerships could continue to be at the core of the marketing and hope that high ROI opportunities still exist. So the meeting allayed enough of our short- and long-term fears to impel us to upgrade (by £2m on average) and, in the absence of negative forecast momentum, it’s time to go back to HOLD. Questions remain though."

StockMarketWire.com
Majestic Wine's reported pre-tax profit is back in the black at £3.1 million for the 26 weeks to 2 October compared with a loss of £4.4 million the year before.

This was driven by Naked Wines achieving profitability in all three geographical markets, and continued profitable sales growth in Majestic Retail.

Adjusted pre-tax profit rose by £6.7m to £6.8m from breakeven a year earlier.

Sales increased by 5.7%, or 4.2% on an underlying basis, and are on track to hit the £500m target by 2019 and current market expectations.

The interim dividend has been increased by 33.3% to 2p per share.

Rowan Gormley, group chief executive, said: "Two years in and profits are growing, our foundation is solid and we are ready to accelerate growth. We have the opportunities to invest in new customers and a team excited to focus on what they do best. It's time to put our foot on the gas."

Full year results are expected to be in line with current market expectations.

The company aims to increase the rate of sales growth in the medium term, by steadily increasing investment in new customer acquisition.

Shore Capital today reaffirms its buy investment rating on Majestic Wine PLC (LON:WINE) and set its price target at 397p

StockMarketWire.com
Majestic Wine announced group reported sales were up 2.3% (4% underlying) in the year to 2 April, driven by 11.3% underlying sales growth in Naked Wines.

The company also revealed a £9.8m improvement in profit before tax (PBT) to £8.3m (FY17: £1.5m loss) and underlying adjusted PBT up 63% to £17.2m.

HIGHLIGHTS:
- Naked Wines key driver of profit growth with adjusted underlying EBIT six times higher than FY17

- Majestic Retail profitability flat - underlying sales growth of 1.9% and improved cost controls offset by foreign exchange pressures on margin

- Naked Wines new customer acquisition spend of £14m

- Returns good and improving - Forecast lifetime payback of customers recruited in the year of 4.7x vs 4.4x on £14.8m of spend in FY17

- Cash flow and balance sheet robust - net debt reduced to £8.4m, 0.35x Adjusted EBITDA (FY17: £25.4m, 1.2x Adjusted EBITDA)

- Final dividend of 5.2p per share, bringing total dividend to 7.2p per share, 41.1% higher vs FY17

CEO Rowan Gormley said: "We are making headway despite headwinds.
"Looking forward, we expect the UK market to remain tough, possibly even tougher than last year.

"Certainly trading since year end has been harder than the prior year in the UK.

"If the UK is headed for a retail crisis, as some commentators are suggesting, then we are planning for a great crisis.

"We founded Naked Wines during the financial crisis of 2008 and proved that investing in acquiring customers and generating loyalty through great products and service, will drive profitable growth even in a tough market."

In the past year, Majestic Wine:
- Delivered profitable growth, despite a tough UK market, which is a testament to our people, our international positioning and the robustness of our model

- Achieved greater efficiency throughout the business

-Paid down our debt to below our target gearing level, and extended our access to borrowing should we need it

Despite this, the company expects to hit FY19 market expectations because unlike many retailers:

- It can generate growth through profitable customer acquisition, even in tough markets

- 20% of our business takes place in the growth markets of the US and Australia, 45% of group sales are online

- The company already, or will shortly, complete projects that eliminate unproductive work, freeing up our people to engage with customers and cutting costs

Liberum Capital today reaffirms its buy investment rating on Majestic Wine PLC (LON:WINE) and raised its price target to 535p (from 500p).

RBC Capital Markets today initiates coverage of Majestic Wine PLC (LON:WINE) with a outperform investment rating and price target of 550p.

StockMarketWire.com
Wine merchant Majestic Wine said on Thursday it would import an extra £5-8m worth of stock to ensure it can meet deliveries post-Brexit as it announced a pre-tax loss amid a "tough" retail market and a gloomy outlook.

The company reported a pre-tax loss of £0.2m for the 26 weeks ending 1 October (down from £3.1m the previous year) as increased new customer investment and fixed costs weighed on profits, as previously announced.

"The UK retail market is tough and will continue to be a drag on performance in Retail and Majestic Commercial; whereas we had previously targeted growth, we now expect full-year 2019 adjusted EBIT across these business units to be flat at best versus full-year 2018," the firm said.

The company also expected to see lower profits at its Naked Wine business as it increased its planned investment to £20m or higher compared with the £19m or higher announced in June.

Nonetheless, the company's longer-term expectations remained unchanged despite the short-term headwinds.

"We were planning for tough times and we're investing through tough times because we know that's the route to a more profitable future. As a result, we now have a business that is almost 45% online and over 20% international with both the option, and intention, to invest further in order to drive returns," the firm added.

Peel Hunt today downgrades its investment rating on Majestic Wine PLC (LON:WINE) to hold (from buy) and cut its price target to 350p (from 500p).

Liberum Capital today downgrades its investment rating on Majestic Wine PLC (LON:WINE) to hold (from buy) and cut its price target to 360p (from 535p).