Majestic Wine (WINE) shares were up 3.4% today after its core retail business reported its first like for like sales growth for four years.
Majestic shares rose 3.4% to 452.7p today, meaning the shares have more than doubled in value so far in 2016.
The share price boost – helped by the wider positive EU-related sentiment in the City on Monday – was driven by its preliminary annual results for the year to 28 March coming in ahead of expectations.
Overall revenues at the wine retailer, which bought online wine club Naked Wines last year, grew 41.3% to £402.1m largely thanks to the Naked acquisition and representing underlying growth of 6.2%.
Majestic Retail like-for-like sales were up 4.8%, the first positive performance in four years, while Naked Wines sales were up 27.3% to £104.3m on a pro-forma basis, driven by strong growth in US.
Naked Wines delivered a 27% increase in sales with the UK up 13.5%, USA up 49% and Australia up by 35.3%,
Adjusted profit before tax dropped by 30.3% to £15m due to investment in Majestic’s transformation plan and acquisition borrowing costs. During the year the group invested an additional £4.1m into the Majestic retail and commercial businesses.
Naked Wines delivered £1m adjusted EBIT, ahead of expected breakeven due to combination of better economics for its “angel” customers and lower growth spend.
Majestic also announced a new dividend policy set out targeting pay-out of 35% of adjusted earnings, commencing in the first half of its 2016/17 financial year.
Rowan Gormley, group chief executive, commented: “We have taken the first step on a long journey – it was a good start but it is just the first step. Early signs are that the plan is starting to work. Strong sales figures reflect the hard work being done on the ground by the whole team.”
He did caution that trading conditions “remain tough in the UK”, while the group is still subject to the effects of volatile currency movements.
However, Majestic added it is making “good progress” in the first year of its three year transformation plan and is on track to deliver sales of £500m by 2019.
Analysts at Liberum said: “Its highly accretive investment strategy is now contributing to group profits and with debt falling quickly the re-instatement of a dividend policy will be well received. The group is increasingly well positioned in all areas of the business and Naked Wines continues to benefit from the structural drivers of online retail growth.”
Investec added: “Early signs from Majestic’s transformation plan are encouraging. Customer growth has been strong, with retention & execution on investment plans key to sustainable growth against a challenging UK backdrop… The challenge for management will be maintaining this ROI as growth investment rises.”