Clicks in ambitious growth strategy
The listed pharmacy, health and beauty retailer yesterday announced its intention to quicken its growth with plans to open 40 new stores this year, ahead of its initial target of 25 to 30 outlets.
Clicks chief executive David Kneale described the expansion as a demonstration of a long runway ahead. He said the South African market was poised for further growth, because of urbanisation. “As urbanisation in the country increases, there are new growth opportunities for new and existing stores,” said Kneale.
He said the rollout of new stores would inevitably lead to an increase in expenses and the group wanted its turnover to grow faster than cost increases. Clicks reported a 14.8percent increase in diluted headline earnings per share (Heps) to 266.3cents for the six months ended February 28.
Retail health and beauty sales grew by 14.3percent. Operating profit grew by 12.2percent to R942million.
Turnover increased by 10 percent to R14.4billion. Retail sales were up 13.2percent. Total income grew by 11.7percent to R3.9bn. The group increased interim dividend by 16.5percent to 102.5c per share.
Retail expenses increased by 12.4percent after the group invested in 46 new stores, 34 pharmacies and space extensions in 24 stores in the past 12 months.
Clicks has forecast that diluted Heps for the financial year ending August 31 would increase by between 12percent and 17percent, compared to the 2017 financial year. It said the trading environment would remain relatively constrained in the second half of the financial year.
Sanlam Private Wealth investment analyst Renier de Bruyn said there was still a large number of shopping centres in South Africa where Clicks was not represented.
De Bruyn said half of the planned new stores would be in existing centres where space has been created for Clicks. The pharmacy market share for chains such as Clicks and Dis-Chem is still relatively low, compared to markets such as the UK and the US.
"Clicks has been gaining market share for a number of years at the expense of independent pharmacies and this trend seems to have further runway,” said De Bruyn.
He said he expected Clicks’ performance in the second half of the year to be “more or less” the same as the first six months, as consumer confidence improves.
Kneale said while consumer confidence appeared to be improving, it was too early for that to translate into increased disposable income. “We are therefore expecting consumer spending to remain constrained in the months ahead.”
He said changes in South Africa’s political landscape had brought about renewed optimism. “But the reality is that the optimism does not immediately translate into money in your pocket. So it is too early to say that this will translate into disposable income,” said Kneale.
Clicks shares rose 2.48percent on the JSE yesterday to close at R200.50.
- BUSINESS REPORT