e-spaces

Despite disappointment at lacklustre units, New Clicks group sales shine
January 21, 2009

By Tom Robbins

Cape Town: Gaming software sales were “slower” at Musica as the contraction in discretionary consumer spending eventually hit the trendy end of the electronics category, owner New Clicks said yesterday.

Despite Musica’s sales turning negative after subtracting store inflation, group sales at New Clicks rose in real terms, pulled up by a resilient performance by core health and beauty chain Clicks.

Musica sales, which include games for the Nintendo Wii console, were up 0.3 percent at R398 million in the four months to December, compared to the same period a year ago.

After stripping out chain inflation of 5 percent, sales were down 4.7 percent.

Musica’s performance was “affected by slower sales of DVDs and gaming software, although the business continued to record market share gains during the period”, the company said, arguing that its rivals had struggled more.

As recently as the year to August, strong gaming and DVD growth pushed Musica sales up 7.7 percent, including store inflation. The chain’s CD sales had dropped 3 percent.

CD sales have fallen by even more in the West as the category was challenged by cheaper and even free music downloads.

Jason Binneman, an equity analyst at BoE Private Clients, said the main reason for the recent softer gaming performance was the slowdown in consumer spending on non-essential items. Binneman believed a secondary reason was that there were no blockbuster games such as Grand Theft Auto, a previous standout, released over the recent Christmas season.

But Binneman said the group’s biggest business, Clicks, which accounted for more than half of sales, had, “as expected, performed well”.

Consumers had stocked up on items such as lipstick and toiletries on a monthly basis at the discounter.

Clicks sales in the four months to December were up 13.1 percent to R2.43 billion, comfortably ahead of the chain’s inflation rate of 5.7 percent, said the group.

Sales growth at the group’s second-biggest business, UPD, a distributor in the defensive drug sector, had also outpaced inflation.

But the group said that UPD sales growth had slowed as it dumped its least profitable and smallest customers to focus on those with whom it could earn a higher wholesaling margin.

UPD sales were up 3.7 percent to R1.62 billion, ahead of 0.8 percent inflation.

But retail chain The Body Shop proved to be less resilient, in volume terms. The Body Shop sales were up 8.7 percent to R42 million. Inflation in the chain was higher at 10.5 percent.

New Clicks said group sales were up 6.1 percent at R4.13 billion, almost twice the companywide inflation rate of 3.9 percent.