Majestic Wine collapses

Majestic's turnaround has been anything but. A squeeze from its commercial division and US Naked Wines business triggered a fresh profits warning Wednesday and the shares sank by a third. However, the wine merchant will still resume dividend payments this year and its £500 million sales target is still on, which it hopes will mean this sell-off is short-lived.

Conditions at Majestic's commercial division have only worsened in the financial year ending 3 April 2017, with flat first-half sales growth and a 200-basis point decline in gross margin. Operating profit could end up £2 million lighter than initial expectations if things don't improve.

Not one to sugar coat things, chief executive Rowan Gormley says: "We need to find a better, more profitable approach for our commercial operations as part of the group and as a result an internal review is now underway."

The Naked Wines business is also likely to slip back into a loss from an "unscheduled" profit in the year to March, as the US business decided to cut its marketing budget to deal with low stock levels. But as these levels improved, management accelerated marketing initiatives and investment. Unfortunately, the failure of a direct mail campaign will hit profit by another £2 million.

"It is very disappointing that two isolated factors are distracting from the great progress across the rest of the group," said Gormley. "We have always said that we would adopt a test and learn approach, and be quick to redeploy capital from underperforming areas, which is exactly what we are doing. While, this approach is delivering good results in the other business units the scale of the US market means that even a test can have a material effect on profits."

We'll find out more in the group's interims on 17 November, but Gormley is convinced Majestic remains on track to generate £500 million sales by 2019 and resume dividends later this year. At least there's a morsel of good news for income seekers.

And it's also not all bad operations-wise, either: the transformation of its retail arm is on track, its UK and Australian Naked Wines businesses are performing well and wine merchant Lay & Wheeler has returned to growth. Christmas is also just around the corner, although we've learnt that we can't rely on festive trading.

Formerly of Virgin Wines, Gormley founded Naked Wines in 2008 after being fired as boss of Richard Branson's vino venture. Based on the crowdfunding model, subscribers pay £20 a month, which is invested in independent wine businesses around the world. Naked Wines is able to buy the product at exclusive prices in return, which are passed onto its "Angels".

The company was snapped up by Majestic Wines in spring 2015 for £70 million, a couple of months after previous boss Steve Lewis ended his six-year reign following shocking Christmas results. Gormley's job was to lead the turnaround.

It's not been as simple as the CEO thought it would be when we spoke to him in February, and the share price has been super volatile. Crashing 44% in 2014 and momentarily slipping below crucial technical support at 300p, this calendar year has seen Majestic quickly claw back these losses.

However, momentum was short-lived and the shares plummeted early Wednesday to their lowest since December 2015. They've since recovered above long-term support at 300p, but investors will demand evidence that these really are just one-offs events, and that improvement is sustainable, before piling in.