Britain's Majestic Wine Plc said on Wednesday it expects full-year core earnings to be below market expectations, citing a failed campaign in the U.S. for its Naked Wines business and poor performance at its Majestic Commercial unit.
Shares in the UK's largest specialist wine retailer were down 28 percent at 313 pence at 0856 GMT on the London Stock Exchange.
Analysts on an average were expecting earnings before interest and tax (EBIT) of 17.4 million pounds for the current financial year, according to company-complied estimates.
The Naked Wine business, which Majestic acquired in April 2015, would slip back to being loss-making due to a failed direct mail campaign in the U.S., after having posted a surprise maiden profit in the last financial year, the company said.
Under the direct mail campaign, the company sent mailers to new customers inviting them to support winemakers and in exchange get preferential prices.
"We got early success in the test campaign, but because of the scale of markets in Americas when we scaled up the test, results were much weaker," Chief Executive Officer Rowan Gormley told Reuters.
The company said first-half sales at Majestic Commercial, which supplies wines to pubs and restaurants, were flat year-on-year and while profit margin declined.
Core earnings for the division could be 2 million pounds below expectations, the company said adding that it is reviewing operations at the unit.
Majestic Wine has 210 wine warehouses across the UK as well as two branches in France, while Naked Wines operates across the U.S., Britain and Australia.
Analysts at Liberum downgraded their estimates for the company, citing a combination of a tough backdrop in Majestic Commercial as well as a planned investment in Naked Wines USA not delivering intended returns.
Liberum cut its full-year sales and gross profit estimates for 2017 by 2.6 percent and 4.7 percent respectively.
The company is on track to hit 500 million pounds of sales by 2019 and would resume dividend payments this year, it said.
(Reporting by Rahul B in Bengaluru; Editing by Sunil Nair)