Operational Review

Review of the year

Musica showed an improved performance for the financial year, and increased its share of the CD, DVD and gaming software markets in a declining entertainment retail environment. Performance gained momentum in the second half of the year as same store sales grew by 3.9%. The brand was impacted by selling price deflation of 4.9% for the year.

The ongoing right-sizing of the brand and the net closure of a further 14 stores, tight expense control and good stock management contributed to operating profit increasing by 36.3%.

While CD and DVD sales declined by 5.1% and 9.8% respectively, Musica again achieved good growth in the technology category, which includes digital accessories, headphones and portable speakers, cellphones and airtime. Technology sales grew by 31.6% and increased its contribution to Musica’s sales to 10%.

The technology offering was extended to create a further 27 technology concept stores. Technology and accessory sections were rolled out to the remaining Musica store base.

The Clicks ClubCard accounted for 44% of sales in Musica, while the basket value of ClubCard holders was on average 25% higher than non-holders. Cardholders earn points and cash-back vouchers on Musica purchases, and these are redeemable in Clicks stores.

During the year two new stores were opened in Gaborone, Botswana, and Middelburg, while 16 stores were closed, with the chain ending the year on 134 stores.

The brand has strong appeal and customers again voted Musica as the coolest music retailer in the Sunday Times Generation Next Awards 2012 and as the second best entertainment store in The Times/Sowetan Retail Awards.

Category %
CDs (5.1) 47 44
DVDs (9.8) 26 28
Gaming (3.4) 17 10
Technology 31.6 10 Not measured

* Aquidneck/GfK

Focus areas for 2013

Musica has demonstrated its ability to gain market share in a declining market while continuing to grow new product categories and increasing profitability.

While discretionary spending on entertainment products is expected to remain under pressure in the year ahead, Musica will maximise opportunities to grow sales and market share. The fast-growing technology and accessories category will be extended in a further 25 stores in the first half of the new financial year.

ClubCard will continue to be used to drive sales in Musica and to enhance loyalty to the brand.

Management will continue to focus on tight cost control and working capital efficiencies to maintain profitability and cash generation. A further 14 stores are planned for closure, which will largely complete the right-sizing of the property portfolio.