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Majestic Wine has beaten the high street gloom with a 3.4 per cent increase in profits for the year.

The retailer said sales of fine wine rose by 25 per cent, boosting pre-tax profits to £16.7 million in the year to March 31st.

Like-for-like sales grew 2.4 per cent, the company added.

The increase in duty on alcohol affected sales in the ten weeks from April 1st to June 9th, Majestic Wine said, with like-for-like sales nearly flat at 0.8 per cent.

But since April, sales have improved, and like-for-like UK sales for the most recent six weeks ending June 9th 2008 up 4.4 per cent.

Tim How, chief executive of Majestic, said: "Although the consumer environment is challenging, Majestic has a clearly differentiated retail model and is well positioned for future growth in this highly competitive market."

Majestic said it has seen good growth in still wine sales particularly from Bordeaux, Loire, Beaujolais, Italy, Argentina and New Zealand. In addition, Champagne and rose sales continued to grow strongly.

Sales of fine wine (still wine priced at £20 and above) grew 25 per cent and now represent 4.2 per cent of UK retail sales, the company added. Majestic said it has installed dedicated fine wine display areas in 45 stores and have plans to add a further ten this year.

Majestic will pay its shareholders a final dividend of 7p on August 15th, making the full year payout 9.8p a 15.3 per cent increase from 2007.

In mid-morning trading, shares in Majestic were up 2.3 per cent to £2.