Majestic Wine shares fall 24% after company issues profit warning

Shares (Berlin: DI6.BE - news) in Majestic Wine (LSE: WINE.L - news) plunged 24% on Wednesday after the company uncorked a profit warning.

The wine retailer said it expected core earnings for the group during the current financial year to be "below current market expectations", but insisted it was on track to meet its three-year plan of £500m of sales by 2019.

The company, which trades shares on the junior AIM market, blamed slower growth in its Majestic Commercial business which supplies wines to pubs and restaurants.

It pointed to flat first-half sales for the commercial business compared to the same period a year ago and a decline in margins.

The company said it had launched a review to identify how it could best achieve profit growth.

Another factor cited by the company was the failure of a direct mailing campaign to promote Naked Wines in the US.

Majestic chief executive, Rowan Gormley, said: "It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group.

"We have always said that we would adopt a test and learn approach, and be quick to redeploy capital from underperforming areas, which is exactly what we are doing.

"While, this approach is delivering good results in the other business units the scale of the US market means that even a test can have a material effect on profits.

"The turnaround plan in Majestic Retail is progressing well, the key initiatives are on track to be delivered on time and on budget, and preparations for peak Christmas trading are well in hand.

"Naked Wines UK, Australia and the underlying US business continue to trade well, and we have managed to restore Lay and Wheeler to growth."

He also confirmed that Majestic still intended to resume dividend payments this year despite the setback.