Majestic Wine replaces head buyer as profits lose fizz
Justin Apthorp retired as buying director on Monday but, in an unusual move, he will stay on the board as a non-executive director. He was in charge of buying a year ago when Majestic caused bad feeling with suppliers by asking them for payments to help fund its new warehouse in Hemel Hempstead.
Rowan Gormley, who took over as Majestic’s chief executive in April, said his recovery plan for the ailing chain needed the full support of suppliers. He set a target of £500m annual sales by 2019 compared with £182m in the first half of this year.
In the six months to the end of September, Majestic’s pre-tax profit fell to £4.3m from £8.5m a year earlier. Excluding costs from the Naked Wines acquisition and exceptional items, profit fell 1% to £8.4m. Gormley said: “There was an impact on supplier relations last year when Majestic sent suppliers invoices for additional warehouse costs. Those kind of tactics are a thing of the past.”
Gormley, whose online Naked Wines business Majestic bought to secure his services, said Naked Wines had good supplier relationships and that he wanted this to apply across the group. Richard Weaver, Majestic’s merchandising director, will become director of merchandising and buying.
Majestic made its demands when retailers’ treatment of suppliers was already in the news. Tesco’s £264m profit warning last year was caused by failings in booking revenues charged to suppliers for promoting their products in stores. Debenhams sparked uproar with its suppliers before Christmas 2013 when it asked for a discount on own-branded goods as a contribution to its investment plans.
Poor Christmas trading capped a string of disappointing results to force out Gormley’s predecessor, Steve Lewis, last year. Majestic found itself squeezed by fierce discounting by supermarkets using wine promotions to lure customers through their doors.
Gormley has said Majestic got trapped in a rut of cost cuts and bewildering discounts that damaged customer service and sales. He has slashed plans for more stores in favour of selling more wine at existing shops and has scrapped the chain’s six-bottle minimum purchase, which harked back to its origins as a warehouse.
Supermarkets are again using wine promotions to attract customers as Christmas approaches. Tesco is selling champagne for just £9 a bottle and Waitrose has just finished offering 25% off all wine.
Gormley said he was not worried about such offers because his plan was to reinvigorate Majestic’s stores with clearer pricing that rewarded customers who spent more. He said shoppers and staff were already more upbeat after prices were simplified and the minimum purchase was done away with.
“I think we’re in pretty good shape for Christmas,” he said. Majestic’s shares rose 1.8% to 316p but they are down by a third since early August.
Companies are not only staff on the payroll and facilities. They extend to their customers, retail outlets, suppliers and brand image they project in society.
Longterm relation based on win-win accords goes to the best for all parts and specially for the main and strong company in the business relations.
Origin information: The Guardian