Discom

“The brand has been transformed to reflect the vibrancy, passion
and culture of the new South Africa.”
 

Financial highlights and statistics           2003  2002  Sales          R’000           771 441           720 895  Sales growth %  7.0  12.1  Comparable store sales growth %  8.7  10.9  Operating profit before interest and after allocation of net costs of support structures                  R’000  (5 571)  (20 637)  Number of stores at year end          Company owned   177  180     Franchised   1  2  Number of full-time permanent employees   1 335  1 246  Weighted trading area m2  49 351  51 821  Net (decrease)/increase in trading area during the year %  (4.8)  8.6  Weighted annual sales per m2 R  15 632  13 911

Positioning
Discom continually focuses on differentiating its product offering from the Clicks brand, and has achieved this through an aggressive move into the African beauty and ethnic hair care markets.

As the brand has been transformed over the past two years to reflect the vibrancy, passion and culture of the new South Africa, stores have migrated from traditional black areas to shopping centres in more upmarket areas. The “Look Good, Feel Good” positioning adopted by the brand is finding increasing support from a younger, emerging market.

Price remains a key factor for Discom’s target market, and in the repositioning programme, care has been taken to retain the platform of providing affordable quality.

Review of the year
Sales for the year were up 7% to R771 million, while comparable store sales growth was higher at 8.7%. The strong growth in the beauty and toiletry categories was largely negated by the decline in homeware sales.

Discom achieved an operating profit before the allocation of corporate costs, but after allocation this figure declined to a loss of R5.6 million for the year, a turnaround of R15 million over 2002.

Store closures as part of the restructuring programme continued, with 18 stores being closed. A total of 53 stores have been closed over the past two years. Discom opened 15 new stores and was trading out of 177 company-owned stores at year-end.

While the level of shrinkage remains a challenge, Discom has been able to arrest the growth trend and for the first time in several years showed a decline in shrinkage levels.

Shrinkage is being addressed in several ways, including an electronic article surveillance system, which has been piloted in 30 stores and will be rolled out to additional stores this year. Discom is also sourcing more product from the central distribution centres, which should further limit shrinkage levels.

As part of the strategy of entrenching the brand’s dominant position in the hair care market, the first three hair salons were opened in Discom stores in Mitchell’s Plain, Johannesburg and Midrand. These salons are independently owned and managed, with Discom receiving a percentage of turnover. Financial assistance has been provided to the salon owners to fund the start-up businesses.

A range of private label hair care and beauty products was introduced and initial sales have been encouraging.

The leadership team has been bolstered by the recruitment of specialists who understand the Discom target market. This includes the appointment of a new head of the lifestyle category who forms part of the dedicated merchandise team for the brand.