Majestic shines amid the gloom; WINE SELLER'S LIKE-FOR-LIKE SALES RISE 3.7% DESPITE HARSH WINTER; Midas.(Business)(Financial report)

Byline: Joanne hart investments editor

JANUARY is a miserable month - dark, damp, cold and frequently a time when many of us decide to give up festive pleasures as alcohol.

Fortunately for Majestic Wine, enough drinkers opt to drown their sorrows instead - or fall off the wagon within a couple of weeks of their New Year's resolution.

Majestic sells wine and plenty of it. Founded just over 30 years ago, the group has about 500,000 regular customers and specialises in selling cases or half-cases of wine rather than single bottles.

The format has several advantages, particularly when compared with off-licences, many of which have been unable to deal with competition from supermarkets.

Majestic operates from large warehouses, most of which are on the edge of towns, where rents are cheaper than in city centres. Employees are knowledgeable but only a few are needed at each store so overall costs are comparatively low. And because the wine is sold in cases, most of it is simply moved from the lorry to the warehouse, without having to be beautifully displayed.

The group's structure is also ideal for internet sales. Many retailers have to create new logistical models to sell online, but Majestic's existing model works perfectly for the web.

Last week, chief executive Steve Lewis said total UK sales rose 6.4 per cent over the crucial Christmas period from November 2, 2010 to January 3, 2011. Excluding new stores, sales rose 3.7 per cent.

The increase may seem a little on the low side, but it does reflect the worst winter weather in decades and follows a particularly strong festive season in 2009.

Analysts predict profits will rise by more than 20 per cent to [pounds sterling]19.5 million in the year to March 31, while the dividend is also forecast to rise by about 20 per cent to 12.4p.

Lewis and chairman Phil Wrigley, a veteran of the retail industry, are keen to expand Majestic through a growing online offer and a significant increase in warehouse numbers.

The group has 160 stores but would like to take that to 250 over the next few years, which will clearly deliver rising profits and increased economies of scale.

Midas verdict: It may seem perverse to recommend a wine retailer when the age of austerity is upon us and wallets are under pressure. But Majestic sells wine that is frequently unavailable elsewhere, it sells at a discount, is extremely efficient and generates plenty of cash, so dividends are generous.

Besides which, Britain's interest in wine has been growing steadily for years and will probably continue doing so. At 4053/4p, Majestic shares have further to go. Buy.

Traded on: Aim

Ticker: MJW

Contact: 01923 298200 or visit majestic.co.uk

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CAPTION(S):

AMBITION: Boss Steve Lewis wants to expand the number of stores, where customers buy in bulk, from 160 to 250