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UPDATE 2-Majestic Wine profit down, champagne sales fizzle out

Published 11/10/2008, 06:46 AM
Updated 11/10/2008, 06:48 AM
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* H1 pretax profit down 25.5 percent

* Like for like sales for five weeks to Nov. 3 down 4.7 percent

* Shares fall about 9 percent

* Company sees Christmas trading period "challenging"

(Adds CEO quote, share detail, analyst predictions)

LONDON, Nov 10 (Reuters) - Britain's largest wine chain, Majestic Wine Plc, reported a slump in first-half pretax profit on Monday, as a rise in sales to private customers was offset by falling business demand for champagne.

"People had very little to celebrate lately," said Steve Lewis, Majestic Wine's chief executive.

"We will fight very hard this Christmas and increase marketing and introduce 40 new products with aggressive pricing in champagne to be very competitive," he told Reuters in a telephone interview.

Majestic Wine expects Christmas trading to be "challenging," it said in the results statement.

Sales of champagne to business customers in the six months to Sept. 29 fell by 6.4 percent as the financial crisis deepened and businesses were reluctant to splash out on bubbly.

However, total sales inched up 3.4 percent to 94.1 million pounds, with sales of fine wines to private customers up 2.9 percent compared to last year.

DRY SPELL

Majestic Wine posted a drop of 25.5 percent in first-half pretax profit to 5.6 million pounds ($8.79 million) and said on Monday its like-for-like sales in the last five weeks were down 4.7 percent.

The company was also hit in France, where the effect of the strong euro and rising fuel costs led to a sharp decline in sales and profit.

A bright spot was Majestic's online business, where orders increased by 11.5 percent compared to last year.

Brokerage Evolution Securities predicted full-year profit declining about 20 percent, with pretax profit of 13.5 million pounds for 2008/09 compared with 17.2 million previously.

At 1034 GMT, Majestic Wine's shares were down 8.78 percent to 139 pence, valuing the company at 90.95 million pounds. Majestic Wine's shares have shed 53 percent of their value this year, underperforming a 27 percent drop in the FTSE All-Share index.

Majestic Wine, established in 1981, owns 146 stores throughout the UK, and is ranked 6 in the UK beverage industry with Diageo PLC leading the market.

Diageo, the world's largest alcoholic drinks group, reported slower first-quarter sales in October but maintained its full-year profit target despite the financial crisis and lower global growth.

($1=.6370 Pound)

(Reporting by Martina Fuchs and Farah Master; Editing by Andrew Macdonald)

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