Clicks Group continued to show its defensiveness in tough trading conditions as retail turnover increased 11.9% in the six months to February 2023, with market share gains in all product categories and expansion plans well in place, CEO Bertina Engelbrecht said yesterday.
Earnings per share for the health and beauty group, adjusting for the impact of the KwaZulu-Natal civil unrest and related insurance payments, increased by 10.2%.
Directors forecast adjusted diluted headline earnings per share to increase between 8% and 13% for the full financial year compared with 936.6 cents for the 2022 financial year. Diluted headline earnings per share were expected to be between -2% and 3% compared with 1 032.7 last year.
The forecast was based on an assumption that the trading environment would remain constrained in the second half, with high inflation and trading disruption caused by load shedding, and no regulatory changes.
Engelbrecht said in a telephone interview that retail turnover had grown 7.2% in the first half of last year, 9.4% at the last year-end, and now 11.9%, and the growth momentum was continuing into the second half.
In the six-month period R1.1 billion was returned to shareholders in dividends and at the end of February 2023 cash resources stood at R1.2bn. The interim dividend was raised 2.8% to 185c per share. Engelbrecht said it should be borne in mind that last year’s interim dividend had included insurance payouts.
She said the strong turnover and profit growth was despite mounting pressures on consumer disposable income and increased load shedding.
Growth was driven by the sustained post-Covid recovery in the beauty and personal care categories, supported by the Clicks ClubCard loyalty programme that passed the 10 million active member milestone.
Clicks expanded its retail footprint to 861 stores by opening 21 new stores. Fifty new stores and 40 pharmacies were planned for the full financial year, with the longer-term target of operating 1 200 stores.
A further 18 pharmacies were opened, extending the national pharmacy presence to 691. Currently 50% of the country’s population live within 5.2km of a Clicks pharmacy. Engelbrecht said the launch by companies of more affordable healthcare schemes was likely to bring new customers given Clicks’ geographical coverage.
Post the reporting period M-Kem was acquired, a long-established 24-hour pharmacy in the Western Cape. This will be Clicks’ first 24-hour pharmacy.
The acquisition of the Sorbet franchise beauty salon chain, announced in November 2022, was awaiting competition authority approval. Engelbrecht said a big majority of the Sorbet franchises were profitable.
Private label sales grew 15.1%, with one in every four products sold now being a Clicks-branded product.
Engelbrecht said the group’s four specialised baby product stores had gained good market share and the intention was to eventually grow this to 10 to 12 destination stores.
UPD’s total managed turnover, combining wholesale and bulk distribution, increased 7.8%. Performance was impacted by the lower increase in the regulated single exit price of medicines granted by the Department of Health and operational challenges during systems transition at three of its distribution centres.
On the outlook for the second half, Engelbrecht said trading conditions were expected to remain extremely constrained.
Clicks Group plans record capital investment of R958 million for the year, split between new stores and pharmacies and supply chain, technology and infrastructure.
Distribution turnover declined by 1.8% due to lost sales opportunities to Clicks during the systems implementation, lower demand from independent pharmacies and the shift of products in UPD from the preferred supplier to bulk distribution channel. Management was taking action to restore turnover growth.
Comparable retail cost growth was contained to 5.6%. Distribution costs increased 13.3% due to higher fuel, security and insurance costs, load shedding, and higher employment costs to maintain service during the systems implementation.
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