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Majestic Wine to increase investment in new customer acquisitions

DBR Staff Writer Published 18 April 2018

UK-based specialist wine retailer Majestic Wine said that it will invest about £12m per year in new customer acquisitions as part of its plans to accelerate growth.

The company said that the opportunity to invest in new customer acquisition was materially bigger than earlier thought.

The move reduces the company’s earnings in its 2019 financial year by up to £3m, but will result taking its annual generation of future value from £48m to £80m per year.

It will see the company increase its initial planned investment from £9m to £12m.

Of the total amount, about £7 to £10m will be directed towards growth and the remaining £2m will be used for ensuring safety of the growth.

Majestic Wine CEO Rowan Gormley said the company is in a good position of having the option to speed up growth by investing in new customer acquisition.

Gormley said: “We are starting from a good place with the core business on track to meet our 2019 sales target of £500m and the market's expectation for profits and dividend in FY18.”

Majestic Wine has more than one million customers in the UK, US and Australia. The company operates in four separate divisions that include Majestic Retail, Naked Wines, Majestic Commercial and Lay & Wheeler.

The company said it doubled sales at Naked Wines in the past three years and delivered profitability in all three markets following the increase of investment in new customer acquisition.

Gormley said: “We believe we can double the level of investment again while maintaining the returns, driving sustained growth in shareholder value.”

The company said Naked Wines Mature Angel sales retention, of 85%, is higher than the customer retention rate earlier reported.

Majestic Wine noted that returns are trending higher as it continues to optimize its investment approach, with early indications demonstrating that similar returns are achievable in Majestic Retail as in Naked Wines.

Image: Majestic Wine CEO Rowan Gormley. Photo: courtesy of Majestic Wine Warehouses Ltd.