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UPDATE 3-Recession takes fizz from Majestic Wine profits

Published 06/15/2009, 04:54 AM
Updated 06/15/2009, 04:56 AM
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* FY underlying profit down 22 PCt, in line with forecasts

* 10 weeks to June 8 UK like-for-like sales up 2.0 pct

* Impairment charge of 5.3 mln pounds for French business

* Div maintained at 9.8 pence

* Shares down 4.5 pct at 0720 GMT (Adds detail, CEO comments, updates shares)

By James Davey

LONDON, June 15 (Reuters) - Britain's largest wine warehouse chain Majestic Wine Plc on Monday posted an expected 22 percent fall in full-year profit, blaming the recession for a sharp fall in champagne sales to businesses.

But the firm, which has a 3 percent share of the UK still wine market and a 11 percent share of the champagne market, said underlying sales had improved in its new financial year, with UK like-for-like sales up 2.0 percent in the 10 weeks to June 8.

The retailer said sales to private and restaurant customers were positive in the year to March 30, but sales to corporate customers, particularly of champagne, fell.

Sales to businesses declined 7.5 percent and overall champagne sales fell 7 percent.

"We've seen a really marked decline in sales to big businesses, that started last September, particularly in sales of champagne to businesses for entertaining, gifting and events," Chief Executive Steve Lewis told Reuters.

"I don't expect that to return in the current financial year because every finance director in every company across the country will have reined-back spending on those sort of things."

Shares in Majestic Wine have increased by a third over the last three months, a performance in line with the FTSE All-Share index.

The stock was down 2.5 pence, or 1.3 percent, at 190 pence at 0823 GMT, valuing the business at about 115 million pounds ($187.9 million).

The group made an underlying pretax profit of 12.7 million pounds. This compares with analysts' consensus forecasts of 12.8 million pounds, according to Reuters Estimates, and 16.4 million pounds in the previous year.

Total sales increased 2.4 percent to 201.8 million pounds but UK sales fell 2.7 percent on a like-for-like basis.

After an impairment charge of 5.3 million pounds taken against the carrying value of the firm's French business, Wine and Beer World's reported pretax profit was 7.4 million pounds, down 56 percent.

Lewis blamed a decline in sales at its three stores in northern France on the appreciation of the euro versus sterling, which has put off Britons from taking day trips.

"All the romance about travelling to France has gone at the moment ... The days of people just popping over to France for a good day out are gone," he said.

The full-year dividend was maintained at 9.8 pence. (Editing by Mike Nesbit and Rupert Winchester)

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