Beauty and medicines still work for Clicks

During trying economic conditions, consumers place a high priority on their health and appearances, as purchasing beauty items still guarantees the feelgood factor.

“Beauty is seen as an affordable luxury. You might not buy the dress but you will buy the lipstick even if it means switching to generic medicine,” said David Kneale, Clicks CEO.

The lipstick index was made popular by Estée Lauder chairperson emeritus Leonard Lauder, who first noticed that beauty product sales tend to rise during hard times, for instance during the Great Depression.

This phenomenon continues to support Clicks, given its long track record of delivering solid earnings.

Thus the flagship Clicks chain increased sales 14.2% while comparable store sales (excluding new stores opened) advanced by 7.5% for the five months to January 14 2018.

The health and beauty category is proving more resilient than the apparel category, as seen in the recent Woolworths and Truworths trading updates, showing that the retailers are buckling under the weight of SA’s economy that’s growing at less than 1%.

Clicks pulled out all the stops to benefit from the Christmas season trade. “We have positioned Clicks as a value retailer, we are very price competitive on everyday prices,” said Kneale.

Drugstore model

Since Kneale’s CEO appointment in 2006, Clicks has rapidly expanded to have the qualities of a drugstore model, in which its stores are supported by instore pharmacies.

The drugstore model has a place in SA, as Kneale puts it: “In healthcare, you are seeing more people choosing to self-medicate over the counter rather than visit a doctor. And this, of course, brings more feet in stores.”

The retailer’s pharmacies are supported by its UPD business, which is a wholesale medicine distributor.

UPD increased sales 11.6% and volumes grew 5.4% when including selling price inflation of 6.2% during the reporting period.

Jean Pierre Verster at Fairtree Capital said SA’s pharmaceutical market remains fragmented, helping Clicks gain market share. “There is still a large number of independent pharmacies out there. This allows Clicks to win market share much easier in its market versus food and apparel players in their markets.”

Clicks faces competition for growth in SA’s pharmaceutical space, mainly from Dis-Chem.