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New Clicks yesterday reported resilient sales growth in defensive lines such as drugs and beauty, but CD sales hit a wall after Bok van Blerk did not repeat his De la Rey hit of last summer.

April 25, 2008

By Tom Robbins

Cape Town – New Clicks yesterday reported resilient sales growth in defensive lines such as drugs and beauty, but CD sales hit a wall after Bok van Blerk did not repeat his De la Rey hit of last summer.

Group sales from continuing operations in the six months to February were up 13.1 percent to R5.64 billion, compared to the same period a year ago. Sales growth was dominated by a steady performance from its core Clicks chain.

But CD sales out of the Musica business fell 1.7 percent, curbing sales growth at the chain. Musica sales were up 8.5 percent to R521 million.

Clicks chain sales were up 11.1 percent to R3.12 billion. Sales at stores open longer than a year rose 9.3 percent. With low store inflation of 3.7 percent, this gave real growth of 5.6 percent.

Same-store figures are considered to be a true underlying indicator of sales performance.

David Kneale, the New Clicks chief executive, said he expected the resilience to the downturn, particularly at the Clicks brand, to carry on.

“Customers will continue to get headaches, will still want to wash, their toasters will still break and their kids will still want games.”

Electronic gaming sales, including Nintendo Wii, were the strongest performer at Musica, climbing 30.9 percent. Gaming and DVD sales now account for 45 percent of Musica’s profit, up from 40 percent.

Local CD sales fell 11 percent after the controversial Van Blerk CD flew off the shelves in the previous February, Kneale said. Local releases in the same month this year had been poor. International sales were up 3 percent for the half-year. Sales by South African musicians make up as much as 35 percent of total CD revenue at the chain.

In developed countries CD sales are in decline as consumers increasingly download music. But Kneale said underlying sales across all retailers were stable in South Africa as access to broadband internet continued to be limited.

Group headline earnings were up 12 percent to R210 million as the retailer increased its operating margin from 5.9 percent to 6.3 percent.

Net profit, which included the disposal of the Discom chain and the sale of land, was up by more at 37 percent to R255 million.

Since February interest rates have been hiked by 0.5 percentage points but inflation has continued to rise, putting further pressure on consumer wallets.

Karl Leinberger, the head of research at Coronation Fund Managers, said: “No retailer is immune to the health of the consumer but they are one of the more defensive retailers, and the growth in the health business will increase their defensiveness over time”.