Majestic Wine insisted it was “past the tipping point” of its turnaround on Thursday, but the booze retailer still has some way to go to convince the market that the worst is over as its shares fell back once more.
A “very strong” second half was not enough to keep Majestic out of the red for the 52 weeks ended 3 April 2017 as it slipped into a pre-tax loss of £1.5m from a profit of £4.7m last year. Non-cash charges related to the Naked Wines acquisition and one-off costs and revaluation of its foreign currency positions hit top-line profitability, to add to the profits warning in September after a failed Naked Wines US direct mail campaign led to higher costs and fewer customers than expected.
CEO Rowan Gormley said Majestic was “past the tipping point, both financially and operationally”, pointing to a 51% rise in second half adjusted EBIT, while Majestic Retail posted its eighth successive quarter of like-for-like growth as sales rose 5.7% in the fourth quarter.
However, the shares dipped a further 4% back to 369.5p by Thursday lunchtime - now 16.7% down year on year. The market reaction was motivated largely by a mixed outlook, with Majestic warning the uncertainty around Brexit was likely to have a long-term impact on demand and could hit its operation in Calais, while the fall in the value of the pound has hurt margins.
Elsewhere, Ocado announced plans to raise £350m to fund investment in its retail offer and its automated warehousing technology. The online grocer said it was keen to take advantage of “historically low financing costs” to place £200m of bonds - later revised upwards to £250m due to investor demand - with the balance coming via an amended credit facility.
The news was accompanied by a 22-week trading update, which showed a 25% increase in revenue but a similar increase in cost of sales. The shares plunged 6.7% to 270.5p on fears the extra borrowing suggests Ocado is not growing fast enough to generate its own cash to invest in the business.
No comments yet