Surprisingly, Majestic Wine’s boss, Rowan Gormley, is no oenophile. “I can’t taste a wine and go, ‘Oh yeah, limestone versus clay soil’,” he admitted to The Sunday Times three years ago.
The former chief executive of Virgin Wines is, however, a master salesman. In 2015, Gormley, 56, clinched the sale of a lifetime, flogging Naked Wines, his loss-making online business, to Majestic for £70m and becoming boss of the enlarged group.
That deal has left him as Majestic’s third-biggest shareholder. The stock has ricocheted about since 2015, but it has staged a minor recovery over the past year, ending last week at 415p. That values Majestic, founded in 1981, at £291.5m.
A few things have given the retailer a boost: one is that analysts at stockbroker Panmure Gordon tipped it as a break-up candidate last year. The mooted buyer, however, is no more: Conviviality, the Bargain Booze and Wine Rack owner, tipped into administration in April.
Since then, Majestic has tiptoed around the carnage of the high street, reporting underlying annual profits that grew by a third to £17.2m, and slashing debt to just £8.4m. Sluggish growth in its chain of about 210 stores has been offset by Naked Wines, which grew sales by 11.3% last year and is now making a profit.
Gormley’s grand plan is to replicate the success of Naked Wines with the larger Majestic group, using tactics learnt at Virgin. Its annual report is littered with phrases such as “sticky customers” and “everyone is a VIP”.
Rather than open more stores, he plans to “invest in customers” by pumping cash into tie-ups with partners such as retailer Hotel Chocolat and Barclays — and by spending more on vouchers to entice new customers. Gormley reckons that every £1 spent on buying customers pays back £4.
His ambitions, however, assume the Naked Wines model is infinitely scalable — and that it translates to the high street. Naked Wines is as much a membership club as a retailer. Its customers (angels) “invest” £20 a month to get preferential access to wines from independent vineyards at cheaper prices. With about 400,000 angels, about
£90m-£100m of Naked Wines’ £156.1m revenues come from via these monthly pre-payments.
I struggle to see this trick being replicated on the high street, where consumers are fickle and the lure of cheap supermarket booze is omnipresent. Gormley has done a decent job getting Majestic into shape, but at some point his growth ambitions will collide with reality. A hangover is bound to follow. Avoid.
