Majestic Wine shows Naked ambition as it looks to water down stores estate

● Drinks retailer currently operates from about 200 shops including 14 in Scotland

Majestic Wine is to embark on a store closure plan and name change as part of a transformation that will see the group stomach extra costs.

Outlining its proposals yesterday, the specialist wine retailer did not specify the number of outlets it will close but chief executive Rowan Gormley said he had “no choice”, adding that he will aim to “minimise job losses”.

Majestic trades from about 200 stores in the UK, including 14 branches in Scotland where the firm has been busy expanding its footprint.

As part of the restructuring, Majestic will also rebrand as Naked Wines following its takeover of the group in 2015 and invest a further £6 million a year in the business.

This is expected to be funded by migrating custom- ers and stores to the Naked brand, asset sales and high street closures. However, the company warned that it will take a largely non-cash restructuring charge of up to £10m this year, with further pain in 2020. Majestic has also put the 2019 dividend under review.

Gormley said: “We also believe that a transformed Majestic business does have the potential to be a long-term winner, but that we risk not maximising the potential of Naked if we try to do both.

“Therefore we have taken a decision to focus all of our capital and energies into delivering the long-term potential of Naked, and releasing value from Majestic.”

In January, the group said that the crucial Christmas season, during which it typically delivers almost a third of its annual sales, proved more challenging than expected due to economic uncertainty and weak consumer confidence.

Majestic expects to meet its sales target of £500m this year and anticipates profits, excluding restructuring charges, in line with consensus.

Analysts at brokerage Shore Capital noted: “Majestic Wine has surprised the market with an announcement to focus the business on Naked Wines, whilst releasing capital from both Majestic retail and commercial operations. The group intends to present a new transformation plan alongside its results in June.

“The statement suggests that the restructuring costs from exiting the retail stores will look to be recouped through asset disposals. In our view, the statement lacks the fine detail about the magnitude, likely timeframe or potential costs of the proposed store closures. The commentary around the dividend policy being reviewed and ongoing restructuring costs may be taken badly by the market.”