Majestic Wine annual profits set to dive amid retail arm sale

Majestic Wine profits are set to dive as the firm drives cash into Naked Wines as part of a major transformation.

The retailer’s pre-tax profits for the year are predicted to slide by 36% year-on-year to £11 million.

Analysts have predicted that revenue will jump 6.3% to £508.1 million in the year to April, driven by strong online sales, when it reveals its full-year figures on Thursday June 13.

It has been a turbulent year for the retailer, which announced plans earlier this year to sell the Majestic Wine retail brand and focus on its fast-growing online operation Naked.

Sales at the company rose 4% to £477.7 million in the previous year, as gains from the direct-to-consumer arm offset a slowdown in Majestic Wine warehouse revenues, which rose by only 0.6%.

On an underlying basis, pre-tax profits rose 63% to £17.2 million for the period.

Last month, Majestic confirmed that a number of potential buyers were circling its retail business, after it kicked off a sale process in April.

Several expressions of interest have been received for the business, which is rumoured to be on the market for £100 million.

In March, Majestic announced it was mulling store closures and would rebrand to Naked, the company acquired by Majestic in 2015 for around £70 million.

Since the sale process was confirmed, a number of turnaround firms and private equity buyers have been linked with the brand, including former Comet owner OpCapita and US investment giant Fortress.

Analysts at Liberum have said it expects a “significant” cash return for shareholders if the sale process is successful.

Liberum also said a deal would leave Naked Wines, based on the company’s current market value, severely undervalued and give the business a “strong” resulting balance sheet.

The broker added: “But there are also risks, as the entire Majestic and commercial business must be sold, which may prove difficult.

“There is also risk the group is left with a tail of poor performing stores, which could incur extra costs.”

Liberum values the unit at between £110 million and £130 million, but said anything between £75 million and £100 million should be seriously considered.