Majestic Wines has announced a plan to invest £21m a year in new customer acquisition, saying there is potential over time to double its customer base from the current level.
The wine retailer already spends £12m a year on new customer acquisition, which is said delivered a lifetime payback in excess of 4x, generating £48m per year of future value. It now plans to add an additional £9m, of which £7m to £10m is directed at growth and £2m is earmarked to ensure the company drives growth safely.
The group warned that this will reduce EBIT in FY19 by £2m to £3m (vs FY18), but stressed it would increase annual generation of future value from £48m to £80m+ a year.
Naked Wines Mature Angel sales retention, of 85%, is higher than the customer retention rate previously reported, the company said, with early indications showing the same returns are achievable in Majestic Retail as in Naked Wines.
Majestic said it was on track to hit £500m sales target in 2019 with FY18 adjusted EBIT expected to be in line with market expectations.
Chief executive Rowan Gormley said: “We are in the fortunate position of having the option to accelerate growth by investing in new customer acquisition.
“We are starting from a good place with the core business on track to meet our 2019 sales target of £500m and the market’s expectation for profits and dividend in FY18.
“In the last three years, we have doubled sales at Naked Wines and delivered profitability in all 3 markets - after increasing investment in new customer acquisition.
“We believe we can double the level of investment again while maintaining the returns, driving sustained growth in shareholder value.
“On a risk / return basis, the case for accelerating investment is clear. We can measure success in months while delivering returns over years.
“This is the right thing to do to maximise shareholder value.”