Toiletries shore up Clicks

Johannesburg - Clicks Group [JSE:CLS] posted resilient sales numbers for its health and beauty division, but there was a slow down at Musica, the group's sound and audio business.

In its trading update for the 18 weeks to January 3, total group sales grew by 10% to R4.7bn, while comparable same-store sales increased by 10.9%.

The Clicks chain's sales grew 16% to R2.9bn. The Body Shop same store sales grew 0.8%, while Musica saw comparable sales dropped 0.9%. Total sales of its United Pharmaceutical Distributors (UPD) division grew by 8.8%.

"It's a very strong set of numbers particularly out of the Clicks chain," said Danie Pretorius of RMB Morgan Stanley.

"The sort of products we sell are the sort of products that customers need whether the economy is booming or in depression," said Clicks Group CEO David Kneale. The health and beauty merchandise categories performed particularly well.

"Clicks has a defensive business model, toiletries are a lot like food - the type of things you can't avoid buying. In that space they have a good brand with loyal customers," said Funeka Beja of Afena Capital.

Christmas is an important period for Clicks due to the type of merchandise mix they stock.

"If you're looking for a low-price gift for Christmas, Clicks is a good place to go and that came through in numbers quite clearly," said Pretorius.

The group's continuing strategy of putting pharmacies inside stores also bolstered its performance.

"This dramatically increases footfall and loyalty of customers and helps to drive volume growth in those stores," said Pretorius.

However, the Musica chain - which sells discretionary products - has seen lower growth than other divisions, said Pretorius.

The group's strategy of giving up non-profitable Musica stores and rationalising the store base should help alleviate some of the challenges faced by this division, added Pretorius.

According to Kneale, the group will continue to dispose of non- profitable Musica stores - but also open up new Musica stores. Since the end of its financial year, the group has opened Musica stores in East London, Durban and Canal Walk in Cape Town.

According to Kneale, Musica's sales for December 2008 were boosted by the Mama Mia DVD, but there was nothing to compete with this in 2009.

"I would expect that with the closure of some non-profitable stores we should see positive growth for Musica for this year but I would not expect significant growth," said Pretorius. He said Musica should explore new titles and platforms to improve sales growth.

"When conditions are this soft (with lower sales growth), there's a low base to come off. As the economy recovers, we expect a consumer recovery - signifying hope for the year ahead for both Musica and The Body Shop".

- Fin24.com