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Naked Wines (WINE)

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Down 219.50p
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Majestic to close stores, rebrand as Naked Wines as it focuses on online

25 Mar 19

LONDON (ShareCast) - (Sharecast News) - Shares in Majestic Wine slumped on Monday as the company said it was rebranding under the name Naked Wines as it focuses on its online business, releasing capital from its retail and commercial operations.
Majestic said it plans to accelerate new customer investment in Naked by an additional 6m a year to 26m in FY20, up from the current level of around 20m a year, funded by asset sales and store closures. In addition, it expects to recognise largely non-cash restructuring charges of up to 10m this year and will review the dividend in June in light of increased investment levels and transformation actions.

The group pointed out that since its acquisition of Naked in April 2015, the business has more than doubled in size, with sales expected to exceed 175m this year. It also highlighted the fact online sales now account for 45% of revenues, while the international segment accounts for 20%.

Chief executive officer Rowan Gormley said: "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."

Majestic said it expects to achieve its sales target of 500m in FY19 and should report group adjusted pre-tax profit, excluding restructuring charges, around the current consensus level.

Liberum said the sale of Majestic, or site closures, is a "complete change" and could have material impacts on the balance sheet and dividend.

The broker said it's "quite a change in tone and strategy since the capital markets last year".

"We now assume no final dividend for FY19E due to timing of the transformation programme but one should view the outer years at risk."

RBC Capital Markets analysts 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.

"Our proprietary US survey highlights Naked Wines as the number one website for selling wine among its target consumers, reflecting its overall superior proposition compared to peers as our research also reveals and 2x price advantage. Yet, the market values Naked Wines at over 60% discount to internet peers on EV/EBITDA, which we view as excessive."

Shore Capital said: "We look for further clarity on the outcome of the sale/magnitude of the store closure programme, noting that the average lease length is less than five years and that circa 40 of the stores are freehold properties.

"Today's retrenchment from the store estate is a major change in strategy and we place our recommendation under review until we have further clarity."

At 1245 GMT, the shares were down 12% at 238.50p.

Note 1: Prices and trades are provided by Digital Look Corporate Solutions and are delayed by at least 15 minutes.


Market Data

Currency UK Pounds
Price 219.50p
Change Today -0.50p
52 Week High 318.00p
52 Week Low 213.00p
Volume 123,278
Shares Issued 72.87m
Market Cap 159.96m


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Ex-Div 24-Dec-19 29-Nov-18
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Amount 5.20p 2.00p