Majestic Wine offers next day delivery, but Rowan Gormley will need more than that in his bottle of tricks
Majestic bought Gormley when it bought Naked Wines, making him chief executive of the combined group with a brief to turn it around. Even though he's making good moves he has a tough battle on his hands
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Your support makes all the difference.Majestic Wine’s decision to offer next day delivery and drop the six bottle minimum online purchase had its fans talking about popping corks and raising glasses.
They needed something to shout about after a September profit, as a result of poor sales to business customers and problems in the US, saw winter starting early for investors.
The company has been working hard to restore its battered reputation in the City since then. There’s nothing like a wine tasting - sorry “site visit” - to get analysts on side. Unfortunately the shares remain no more loved than a corked bottle.
Even the positive press garnered by the next day delivery plan hasn’t helped. So, is it fair to ask if the company did the right thing in buying Naked Wines? Sorry, I should say, is it fair to ask if the company did the right thing in buying the latter’s chief executive Rowan Gormley? His willingness to become chief executive of the combined business played a significant role in the purchase.
And no, it's not a fair question to ask. At least not yet. Despite the company’s apparent problems, he’s doing the right things. In addition to the next day delivery pledge, the company is planning a shake up in the way deliveries are handled.
From next month Majestic will have what it calls a “National Fulfilment Centre” which it expects to handle 40 per cent of its orders. They were previously dealt with and dispatched by local stores.
In theory, shop staff will have more time to talk to customers as a result. That shouldn’t be underestimated.
Majestic is in something of a squeezed middle, between the supermarkets (and especially the likes of Aldi which now has specialist wine stores of its own) beneath it and posh traditional wine merchants above.
To compete it has to offer something that the supermarkets can’t while at the same time sourcing cost effective high quality tipples that fancy merchants with fancy names might miss.
That something is enthusiastic and knowledgeable staff who can help find interesting and exciting wines for customers that they will have them coming back for more even if they have to pay a little extra. If Majestic's shop staff have more time to sweet talk its customers they’ll have more time to make sales.
Even so, life remains tough for Majestic. The fall in the pound will require it to either eat margin or raise prices, not an easy thing to do in the run up to Christmas when the supermarkets, in particular, might very well be inclined to use wines as loss leaders. It will be doubly tough if, as expected, the economy takes a turn for the worst.
The company did the right thing in buying Mr Gormley, who is doing the right things from a strategic perspective. But it still might not be enough.
It isn’t yet time to open any celebratory wines on Majrestic’s account, despite this latest sensible step in Mr Gormley’s turnaround plan. Investors might very well be better served with a stiff whisky to steady their nerves.
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