In a year that saw numerous economic challenges, South Africa’s leading health and beauty retailer, Clicks, has managed to secure a slight profit increase. This remarkable feat has come alongside ambitious plans for expansion, shedding light on the company’s resilience and commitment to growth.
Steadfast Performance in a Challenging Environment
Clicks recently released its financial results for the year ending August 31, 2023, unveiling an encouraging financial report despite the turbulence in the economic landscape. The retail giant reported that it achieved market share gains across all core product categories, with significant growth in private label sales and a notable recovery in the beauty segment. One standout achievement was the significant increase in its Clicks ClubCard Loyalty programme members, which has now grown to 10.4 million active members.
Strategic Takeovers
Throughout the fiscal year, Clicks successfully completed three strategic takeovers amounting to a total of R320 million. These acquisitions include the purchase of 194 Sorbet outlets, the 24-hour pharmacy M-Kem, and a pharmacy software development company known as 180 Degrees. These acquisitions mark Clicks’ commitment to expanding its footprint and services in the retail and pharmaceutical sectors.
Pharmaceutical Wholesaler Thrives Amid Challenges
Within the Clicks group, UPD, the pharmaceutical wholesaler, saw an increase in imported turnover and profitability during the latter half of the fiscal year. However, the business was not without its challenges. These challenges stemmed from a smaller increase in the regulated single exit price (SEP) of medicines and operating difficulties at its distribution centers. Despite these challenges, UPD demonstrated its resilience in a demanding environment.
Cost Pressures and Expenses
Clicks also had to grapple with several cost pressures during the fiscal year. Growing insurance premiums and an 11.4% increase in diesel costs put pressure on retail costs, which experienced comparable growth of 7.4%. Distribution costs also rose by 13.4%, primarily due to higher expenses related to insurance, transport, diesel, and employment.
The group’s expenditure on diesel to run generators during load shedding amounted to a substantial R53.8 million over the fiscal year, highlighting the impact of energy challenges on operating costs.
Financial Snapshot
In terms of financial performance, the group reported that its total headline earnings, including insurance recoveries from the prior year following the 2021 unrest, grew by 0.8% to R2.5 billion. Basic earnings per share, however, experienced a decrease of 3.5% to 1,042 cents, while diluted headline HEPS increased by 1.2% to 1,045 cents. When adjusting for the insurance recoveries in the prior year, diluted HEPS exhibited robust growth, surging by an impressive 11.5%. Although the group’s profits grew only marginally, it increased its dividend by 6.6%, reaching 679 cents per share.
Ambitious Expansion Plans
Looking ahead, Clicks remains poised for growth and expansion. The group anticipates that trading conditions in the upcoming fiscal year will continue to be challenging. However, it expressed confidence in its business model’s resilience. The management stated that “the organic growth opportunities in Clicks, together with the group’s strong cash generation and healthy balance sheet, should ensure that the group continues to deliver on its medium-term financial and operating targets.”
To support its ambitious plans for expansion, Clicks has outlined a roadmap for the near future. The company intends to open between 40 to 50 new stores and an equivalent number of pharmacies during the next fiscal year, maintaining its longer-term target of 1,200 stores. A substantial capital investment of R880 million is planned for the 2024 fiscal year. This investment encompasses R487 million allocated for new stores and pharmacies, as well as the refurbishment of 50 to 60 stores. An additional R393 million will be dedicated to strengthening the supply chain, enhancing technology, and improving infrastructure.
Conclusion
Clicks’ ability to thrive amid the challenging economic environment and embark on an ambitious expansion plan reflects the resilience and adaptability of the company. The strategic acquisitions, growth in customer loyalty, and prudent financial management underscore Clicks’ commitment to delivering value to its customers and investors. As it continues to navigate economic headwinds, the company remains optimistic about its future prospects, ready to seize new opportunities and expand its footprint in the South African market.
