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Majestic Wine shares jump as it invests in growth plans although earnings will be hit

The AIM-listed firm said it already invests around £12mln a year in attracting new customers and plans to invest an additional £9mln to £12mln

Majestic wine
Majestic Wine also said the firm is on track to hit its £500mln sales target in 2019

Majestic Wine PLC (LON:MJW) shares jumped 7% higher on Tuesday after the wine retailer announced plans to accelerate growth by materially increasing investment in new customer acquisition, though it warned that it might reduce next year’s profits by up to £3mln.

The AIM-listed firm said it already invests around £12mln a year in attracting new customers and plans to invest an additional £9mln to £12mln.

READ: Mixed Christmas for Majestic Wine

The firm said this move will reduce its adjusted underlying earnings (EBITDA) by £2mln to £3mln in financial year 2018 but will increase annual generation of future value from £48mln to £80mln a year.

The company explained that it expects to see significant benefits from this investment from financial year 2021 and beyond.

Majestic Wine also said it is on track to hit its £500mln sales target in 2019 and financial year 2018 adjusted EBIT is expected to be in line with market expectations.

Rowan Gormley, CEO of Majestic Wine, commented: “We are in the fortunate position to accelerate growth by investing in new customer acquisition.”

He added: “In the last three years, we have doubled sales at Naked Wines and delivered profitability in all three markets - after increasing investment in new customer acquisition. We believe we can double the level of investment again while maintaining the returns, driving sustained growth in shareholder value.”

The CEO concluded: “On a risk/return basis, the case for accelerating investment is clear. We can measure success in months while delivering returns over years. This is the right thing to do to maximise shareholder value.”

In lunchtime trading, Majestic Wine’s shares were up 7.4% to 426.5p.

Quick facts: Majestic Wine PLC

Price: 264 GBX

AIM:WINE
Market: AIM
Market Cap: £192.26 m
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