Majestic Wine

REDUCE

21/11/2011 Ben Jaglom

Wine specialist Majestic Wine (MJW) has reported a 20% increase in pre-tax profits thanks to strong demand for fine wines.

The AIM 50 constituent has declared pre-tax profits of £8.8m on sales of £127.8m (2010: £117.6m) for the 26 weeks to 26 September. Like-for-likes increased in its retail stores by 2.7%, while the interim dividend rose by 15.2% to 3.8p a share. There were eight new store openings over the period.

The company notes that the average spend in its stores rose from £122 to £125, while the average bottle of still wine increased in price from £6.67 last year to £7.13. A particularly strong area of growth was its fine wine sales, which saw a 20% increase in the number of bottles sold above £20. There was also considerable strength in its e-commerce operations, with sales online rising by 8.7% against last year.

Analysts at house broker Investec are forecasting pre-tax profits of £22.5m (EPS: 25.4p) on turnover of £280.8m for the year to March 2012. In 2013, profits of £26m on revenues of £318.6m are expected.

Last recommended by Growth Company Investor this June at 471.25p, the shares have since sunk to 366.75p. With considerable spending pressures on its core middle-class customers, who are experiencing a decline in disposable incomes, the shares could well have further to slide. Trading on 14 times forecast earnings for 2012, the shares are fully valued. Reduce.