Clicks Group reports 11.6% rise in sales to R7.7bn

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There is little to support spending as living costs continue to rise‚ putting strain on disposable income. The rise in interest rates‚ a slowdown in credit including unsecured lending‚ poor job prospects and a moderation in income growth are worsening the decline in consumer activity.

The trend of consumers delaying their purchases until closer to Christmas continued and this was further affected by the Clicks Group's decision to close all its stores on Sunday 15 December, as a mark of respect for Nelson Mandela's funeral. As a key trading day in the retail sector‚ other retailers such as Woolworths (WHL)‚ Shoprite (SHP) and Massmart (MSM) were also affected by store closures.

Music sales suffer

The core Clicks chain grew turnover by 8.4%‚ with dispensary sales rising 12.4% and frontshop sales 7.2%. Comparable sales grew 5.7%‚ with selling price inflation of 3.6%. In a declining CD and DVD market as consumers shift to digital formats‚ Musica's same-store sales rose just 1%.

Professional services firm PwC said retail spending on physical formats will fall at a faster rate than spending on digital will rise‚ resulting in a yearly decline in spending on recorded music.

Retail spending on digital music is forecast to rise around a compound annual growth rate of 7.8% in the next five years‚ totalling about R132m in 2017.

The Body Shop grew sales by 6.3% and in comparable stores by 2.9%. Total retail sales increased by 7.5% and 5.3% on a comparable store basis.

"We've also seen the continued shift of consumers deferring their purchases until after Christmas to benefit from markdown sales in early January‚" CE David Kneale said.

UPD increased turnover by 19.5%‚ with inflation of 3%.

Better than expected

Absa Investments analyst Chris Gilmour said that in revenue terms‚ Clicks Group's numbers were better than expected.

"There was a bit of squeezing of margins. There has been aggressive discounting across the group‚ particularly when you look at The Body Shop‚ and that has (put) some pressure on margins‚ undoubtedly‚" he said.

Clicks is adamant that there remains a market for physical music products‚ even if it is declining. The group has right-sized Musica‚ shutting unprofitable stores in the hope of gaining market share as the "last man standing"‚ as its focuses on technology and accessories such as headphones and speakers.

"At Musica‚ if you look at comparable sales of 1% and take out inflation of 5.7%‚ that suggests volumes are down 4.4%. That's big and may just be part of a continuing trend‚" Gilmour said.