Majestic Wine plunges to annual loss amid talks to sell retail arm

Shares in Majestic rallied on Wednesday after Sky News reported that activist investor Elliott has launched a bid for 200 Majestic Wine stores.

In its results for the 52 weeks to 1 April 2019, group revenue at Majestic grew by 6.3 per cent to £506.1m after benefiting from further customer acquisition by Naked Wines.

Sales growth at Naked Wines, whose customers crowd fund independent winemakers in exchange for preferential prices on exclusive wines, accelerated to 14.5% last year, up from 11.3% in full year 2018.

The plunge was attributed to accelerated investment in the Naked Wines business as well as lower profitability from the retail arm.

Chief executive Rowan Gormley said: "We are at a crossroads in the company's history".

"Although we have several options to realise value from Majestic, the cleanest and best for customers, staff and shareholders now looks to be an outright sale at this time", he said.

"A further update will be provided if and when negotiations conclude, at which point we will seek shareholder approval to move ahead".

The appointment comes as the Majestic Group gears up to split its business - it confirmed this morning that it is in "advanced talks over a potential sale of its retail and commercial outlets", with the group operating as separate businesses from today, confirmed Lincoln.

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In a note to clients, analysts at Liberum Capital said the resignation of Hodder had come as an "unexpected surprise" while also questioning why the final dividend needed to be suspended.

The retail business and Naked arm will be run independently from one another for the rest of the year if a sale is not secured this summer, with the process restarting in early 2020, the company said.

'We would have thought shareholders would receive more so we question if this means the group intends to invest significantly more into acquisition spend than we now forecast?

'There are disadvantages to being an online business with wine. That type of connection would be lost by going online-only. The fact it is flagging contingency plans if it can not complete the sale during the summer - i.e. have another go in 2020 - would suggest it is far from a done deal. In fact, they won't get a final dividend for the 2019 financial year at all if the business isn't sold'.

RBC Capital Markets analyst Sherri Malek said: "We continue to believe Naked Wines can drive a significant re-rating of the shares, positioned in the two fastest-growing channels in the wine market".

"This is especially important in wine retailing, where shoppers value the knowledge and experience of staff. By moving its business online, there is arguably little to differentiate it from any of the other countless online alcohol retailers", Yacoub said.

It pumped £19m of new customer investment into the online division, up from £5m the previous year.

In mid-afternoon trading, Majestic's shares were down 11% at 283p.

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