|
Music Division
 “The
division has undertaken a strategic repositioning to include other areas
of entertainment, such as gaming, DVD and lifestyle merchandise.”
| Financial highlights and statistics |
|
|
|
| |
|
2003 |
2002 |
| Sales |
R’000 |
482
287 |
439
333 |
| Sales growth |
% |
9.8 |
24.9 |
| Comparable store sales growth |
% |
9.6 |
12.0 |
Operating profit before interest
and after
allocation of net costs of support structures |
R’000 |
25 675 |
21 470 |
| Number of stores at year end |
|
|
|
| Company owned |
|
138 |
135 |
| Number of full-time permanent employees |
|
545 |
476 |
| Weighted trading area |
m2 |
17 134 |
16 154 |
| Net increase in trading area during the
year |
% |
6.1 |
10.9 |
| Weighted annual sales per m2 |
R |
28
148 |
27 197 |
Positioning
The music division has two brands: Musica, the country’s largest
retailer of compact discs (CDs) and music products, and the Compact
Disc Wherehouse, a specialist store for discerning music enthusiasts.
Music sales both globally and locally have shown a marked decline
in recent years as the CD format reaches maturity. In anticipating
this trend, the music division has undertaken a strategic repositioning
from purely music to broadening its offering to include other areas
of entertainment, such as gaming, DVD and lifestyle merchandise.
In line with this business shift, Musica has adopted a new brand
positioning statement of leading South African popular culture through
entertainment. CD Wherehouse is positioned as a destination for
people passionate about music and movies.
|
 |
Review of the year
It has been most encouraging that despite the slowdown in national music
sales, the division has grown market share over the past year. Sales increased
by 9.8% to R482 million and operating profit rose 19.6% to R25.7 million.
While the move into broader entertainment products only started in the
second half of the year, DVD sales have grown by over 30%. The popularity
of local artists continues unabated and now accounts for 31% of total
sales.
CD sales continue to be negatively affected by piracy and the ability
to download music off the Internet free of charge.
Strategy
The merchandising and sales strategies around the range of entertainment
products will be the key focus in the year ahead. The components
of this strategy are:
- Gaming: This has strong growth potential and will be
stocked by more than half the stores by Christmas. A six-week
pilot launch in 36 stores generated turnover of R2.3 million.
While the margin on gaming products is slightly lower than CDs,
the product has a high stock turn and markdowns will be minimal.
- DVD: This is the fastest growing technology format
ever and is likely to continue this strong growth pattern in the
local market as the cost of DVD hardware reduces further.
- Lifestyle merchandise: The high margin branded clothing
and accessory range will be available in all key stores by year-end.
A comprehensive marketing strategy has been developed to capitalise
on Christmas sales this year, with a renewed focus on promoting
the product and the artists rather than the brand only.
The roll-out of the point of sale retail store system will continue
and is expected to be implemented in all stores by March 2004. This
allows for more accurate customer profiling within each store.
Seven new stores are planned to be opened during the year, while
a further seven will be relocated or revamped.
|
|
| Store Locations |
|
|
| Province/City |
CDW |
Musica |
| Gauteng |
|
|
| Johannesburg |
2 |
25 |
| Pretoria |
|
13 |
| Other |
|
5 |
| Mpumalanga |
|
6 |
| Limpopo |
|
5 |
| North West |
|
6 |
| Free State |
|
6 |
| KwaZulu-Natal |
|
|
| Durban |
1 |
7 |
| Pietermaritzburg |
|
2 |
| Other |
|
4 |
| Eastern Cape |
|
|
| Port Elizabeth |
|
6 |
| East London |
|
3 |
| Other |
|
5 |
| Western Cape |
|
|
| Cape Town |
1 |
25 |
| Stellenbosch |
|
1 |
| Other |
|
6 |
| Northern Cape |
|
3 |
| Botswana |
|
2 |
| Namibia |
|
4 |
| |
|
|
| Total |
4 |
134 |
|
|
Prospects
The outlook for the division is promising, as the music division moves
to expand beyond its current core business of music products and capitalise
on other growth areas in the lifestyle entertainment sector. New store
opportunities, a renewed product focus and the Christmas promotional drive
are expected to boost sales growth in the year ahead.
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