Share prices for the wine specialist Majestic Wines (LON:WNE) dropped 25 percent on Wednesday, following on from profit warnings released by the company earlier in the year.
The disappointing figures are said to be a a result of a misguided US marketing initiative involving Naked Wines, which failed to translate into sales. The move, coupled with poor demand, has meant that profits until April 2017 are predicted to be lower than current market expectations of £16.1 million.
Naked Wines was purchased and is operated under the umbrella of Majestic Wines as of April 2015. Naked Wines is an online retailer that enables subscribers to support independent winemakers, and in turn they are offered exclusive deals on produce. Whilst initially delivering a profit to Majestic Wines, this year Naked Wines is expected to make a small loss as a result of failed direct-email marketing endeavours in the U.S.
Rowan Gormley, Majestic’s current chief executive and founder of Naked Wines said of the development:
“It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group. We have always said that we would adopt a test and learn approach, and be quick to redeploy capital from underperforming areas, which is exactly we are doing.”
In light of these underwhelming figures, Gormley has nonetheless committed to revitalise the Majestic Wines brand and continue to remedy poor sale numbers of recent years. An initiative which required all customers to subscribe to the purchase of six bottles minimum was recently abandoned due to unpopular reception from consumers; this was a momentous move from the norm for the brand, who have sold wine by the case since the 1980s.
Majestic Wines are still projected to resume dividend payments this year and, moreover, the company are s on target to achieve goal profits of £500 million sales by 2019. Gormley also emphasised that Naked Wines concessions across the UK and Australia were still trading at strong levels.
Majestic Wines are currently trading down 24.31 percent at 328.10 (1621GMT).
Researched by Nicole Jeary