Majestic Wine is on course to change its name to Naked Wines, rebranding some of its more than 200 stores to Naked Wines and closing others.
The wine retailer today set out plans to put its Naked Wines pureplay front and centre of its retail business. The new business model will see Majestic customers and stores move to the Naked Wines brand, although some stores will close. How many shops will close should become clearer when the retailer sets out its full transformation plan in June, alongside full-year results. Currently, Majestic Wine, founded in 1980 has 211 stores.
Majestic Wine is led by Rowan Gormley who founded Naked Wines in 2008 and joined Majestic in April 2015 as group chief executive, when Majestic bought Naked Wines. Today the enlarged group set out its initial plans to release capital from Majestic Wine, which sells to customers and commercial customers through a multichannel model, in order to invest in expanding Naked Wines.
Gormley said in today’s statement: “It is clear that Naked Wines has the potential for strong sustainable growth, and we will deliver the best results for our shareholders, customers, people and suppliers by focusing all our energies on delivering that potential.
“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. Where we have no choice but to close stores we will aim to minimise job losses by migration into Naked.
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. Our plans for doing this are well advanced, and we look forward to sharing the final details in June.”
Since Majestic bought Naked Wines in 2015, Naked has more than doubled in size, with sales expected to pass £175m this year. Almost 45% of Majestic Wine group sales are now online and more than 20% are international. Now the retailer plans to refocus its investment into Naked Wines, and expects to boost its new customer investment in Naked by £6m a year to an annual £26m – from which it expects an average fourfold payback. The cash to do that will come from selling assets and closing stores.
Since 2015, Naked has expanded its direct links with winemakers and now works with a portfolio of 200, who it pays up front to make wines for its customers. Customers of the pureplay wine business are known as ‘Angels’, subscribing a set amount each month which they then spend ordering wine. There’s a social element to the business as members recommend the wines that they like on the Naked Wines platform. The Naked business has been built on the idea of freeing winemakers from the need to market their wines, thus enabling them to cut the cost of the final bottle to customers, who then use the money they have accumulated to buy at a discount.
The update came as the Majestic Wine group said it expected to hit its £500m sales target in the year to April 1 2019. It also expects pre-tax profits to meet expectations. Majestic Wine is currently ranked a Top250 retailer in IRUK Top500 research, while Naked Wines is Top500.
Commenting on the plan, Paul Hickman, head of consumer research at Edison Investment Research, said: “Majestic is making the inevitable response to the success of its growth child Naked Wines, outlining a transformation plan to reform the entire group around Naked.”
At the time of writing, however, investors did not appear initially to have warmed to the idea, with Majestic Wine’s share price falling by 11% today to 239p.
Image courtesy of Majestic Wine