Is it closing time at Majestic Wine? The company wants to jettison the UK chain beloved of middle-class wine aficionados and recast itself as Naked Wines, the fashionable online sister brand, which delivers to your front door.
The radical surgery is being proposed by chief executive Rowan Gormley, who took charge four years ago when Majestic bought Naked, the company he founded, for £70m. The company is due to report its full-year results on Thursday and investors are keen to know how the break-up plan, revealed two months ago, is progressing.
The 200-store chain has a mooted price tag of at least £100m, and private equity firm OpCapita, the controversial former owner of the now-defunct Comet retail chain, is one of the suitors said to be in the frame.
When he arrived in 2015, Gormley was charged with turning around the near-40-year-old chain, which was in trouble thanks to stiff supermarket competition and high-street decline. Add to that the Brexit-related currency shock, which has pushed up wine prices, and wider social trends such as young Britons imbibing far less than their parents, and the future looked uncertain at best.
A sale of the retail chain would complete the journey on which the South African internet wine guru has taken the company. Visiting a shop and heading home with a car full of wine will be replaced with Naked’s trendy subscription model, which lets customers play at being angel investors, becoming “friends” with the winemaker rather than just the local store manager.
Whatever happens with the sale talks, Gormley has said the main quoted company will rebrand as Naked Wines, and some store closures have been flagged. At a time when many retail chains are struggling with a sea change in shopping habits, Gormley believes changing horses will offer investors long-term sustainable growth. “We believe that a transformed Majestic business does have the potential to be a long-term winner,” he said when he announced the plan two months ago. But he warned there was a risk of not maximising the potential of Naked if he tried to turn around both companies.
Wayne Brown, analyst at stockbroker Liberum, suggested now was a good time to decouple the businesses, as investors had struggled to value the group thanks to the very different business models operating under its banner. The shares are down nearly 40% in the past year at 282p, valuing the company at about £200m.
“If the process to sell Majestic Wine is successful, we can see a scenario in which significant cash is returned to shareholders, which would leave the current market capitalisation severely undervaluing Naked Wines,” said Brown. However, it was essential that the company offloaded the entire chain, otherwise it risked being left with a costly tail of poorly performing stores, he warned.
