Majestic Wine (MJW) CEO Rowan Gormley is targeting sales of more than £500m by 2019 as the business embarks on a three-year turnaround plan.

It comes as the wine retailer’s pre-tax profits halved in the first six months of the year and Gormley warned full-year profits would be lower than expected as a result of the investment in trials of new formats in the past few months.

Shares in the group plunged more than 6% on opening this morning to a record low of 290p but have since rallied to 1.8% higher than Friday’s close at 315.5p.

Gormley, who took charge of Majestic following the £70m acquisition of his Naked Wines business in April, has been conducting a thorough review of the group since June.

Today, he unveiled a “transformation” plan which includes increasing revenues from the about £280m a year currently to more than £500m by 2019, delivering “sustainable, volume-led earnings growth and improved return on capital” in the process.

He is also significantly reducing the total UK store target from 330 to 230 after cutting the new branch opening programme from 16 a year to two or three, while reviewing the existing network of 211 stores.

The plan also includes continuing to expand the Majestic commercial business and Naked Wines in the UK, US and Australia.

“Six months in to my new job it is clear to me that we have a solid core business at Majestic, and two great growth engines in Naked and our commercial business,” Gormley said.

“We have a clear plan, which will require investment and take three years to complete, but will also deliver a better business that can create sustained growth in shareholder value.”

Chairman Phil Wrigley added: “We now have a first-class team and a compelling strategy to create a real step change in the value of the business for our shareholders. The team has completed a thorough ‘root-and-branch’ review of the business, identified the key steps to be taken and the measures that will demonstrate our progress over the coming years. Alongside all this activity the new team has traded the business effectively.”

However, Gormley warned the transformation would take time and require significant investment. “So we expect profits to fall before they grow again,” he said.

Majestic sales increased 36% to £181.6m and adjusted earnings before interest and tax by 12% to £9.5m in the six months to 28 September thanks to the acquisition of Naked Wines. Excluding the gains made from the purchase, underlying sales grew 6%, as did EBIT, with retail like-for-like figures, which have been in decline in recent years, up 2.3%. Gormley said the test initiatives of removing the six bottle minimum purchase, simplifying the pricing proposition, rationalising the range and making the shops easier to shop in all played a part in the like-for-like improvement.

Naked Wines reported strong sales growth of 35% on a year ago and the Majestic commercial business registered growth of 8%.

However, pre-tax profits fell 50% to £4.3m as the group booked a £2.6m impairment charge for its Lay and Wheeler fine wine business after it failed to hit its targets and “barely” turned a profit in the period.

Investment bank Liberum has held its ‘buy’ rating on the stock but lowered its target price from 500p to 400p due to a “very poor” share price performance leading into the results. Investec added: “An encouraging first half gives us confidence that management is making the right decisions as part of a three-year transformation plan for Majestic, focusing on customer recruitment and retention.”