Majestic Wine says cost of Naked Wines acquisition responsible for profit decline

Wine retailer Majestic Wine reported a 22.6% decline in pre-tax profit, despite a 2.3% rise in revenue, attributing the fall in profit to administration costs and the acquisition of online rival Naked Wines

Majestic Wine bought its competitor Naked Wine on 10 April 2015 for £70m ($108.8m, €96.8m).

With the Acquisition of Naked Wines came a 'free CEO' as Rowan Gormley, former chief executive of the acquired company was appointed as new chief for Majestic Wine.

Gormley founded Naked Wines, which connects independent wine companies to angel funders who fund start-up businesses in return for wine at wholesale price, in 2008.

With the acquisition of Naked Wines, Majestic Wine added another 300,000 customers to its existing base of 640,000. Gormley said that the company, in its new form has "excellent future prospects"

"Majestic Wine has many unique competitive advantages, especially its incredible staff," he said in a press release. "When combined with Naked Wine's digital strengths, and both businesses ability to source exclusive and exciting wines for their customers, we are uniquely placed to build a fast growing international leading wine specialist."

The company announced after the acquisition that dividend would be withheld until the financial year 2018, but shareholders stayed keen, which resulted in a big share price rise despite an initial fall.

Despite the revenue growth to £266.0m, Majestic Wine saw a slight decline in profit margins but market share grew to its highest point yet and the company said it was positive about the future.

Gormley concluded: "I am confident that we will create significant value for our shareholders over the medium term."