Clicks looks to post-Musica era
• Retailer forecasts 8%-13% rise in full-year headline earnings but still expects tough conditions
Clicks expects its secondhalf earnings to improve as it shuts down its last 11 Musica stores by May after the division lost R71m in the six months to February, more than 10 times the loss of the previous comparable period. The retailer’s diluted headline earnings per share increased 9.5%, but without the music retailer earnings would have increased 14.1%.
Clicks expects its second-half earnings to improve as it shuts down its last 11 Musica stores by May after the division lost R71m in the six months to February, more than 10 times the loss of the previous comparable period.
The retailer’s diluted headline earnings per share, a main profit measure that strips out certain one-off items, increased by 9.5% to 371c.
Without the music retailer — it is closing down as consumers switch to digital entertainment — the retail and medicine distributor’s earnings would have increased by 14.1%.
Most Musica employees had been absorbed into its other stores, Clicks CEO Vikesh Ramsunder told Business Day.
Clicks, owner of UPD medicine distributors and The Body Shop, forecasts an 8%-13% increase in full-year headline earnings but still expects a tough trading environment, Ramsunder said.
In the six months to February, Clicks’s retail sales grew at 4%. Price inflation was 3.2%, meaning there was little growth in the volume of sales, mimicking Checkers and Pick n Pay’s turnover growth that has been driven largely by inflation.
Ramsunder said people have been shopping less during the pandemic, resulting in less impulse buying of items such as chocolates and snacks at the checkout and leading to fewer items sold.
Sales at its retail stores — Clicks, The Body Shop and Claire’s accessory stores — were driven by an almost 25% increase in demand for vitamins as consumers tried to stay healthy during the Covid-19 pandemic.
Cosmetic and accessory sales were flat as people worked from home, and lipstick sales dropped due to mask-wearing.
Clicks has repeatedly said it aims to have 900 stores within 5km of every resident, and the Covid-19 pandemic has not derailed that aim. In the past six months, it opened 17 stores and now has 50% of customers living within 6km of one of its 601 pharmacies, with 77 stores still needing pharmacies. It will open a further 36 pharmacies this year, upgrade some stores and open 40 new stores, spending R317m.
Clicks used its results to announce that it has capacity to vaccinate up to 700,000 people a month in its 601 pharmacies. Sixty-two of its pharmacies have been nominated to administer jabs for front-line healthcare
workers, though they have yet to be used for that purpose.
However, Clicks does not have all the information it needs on the rollout, which has not yet started. SA is still awaiting the arrival of vaccines for the population.
Asked if the government was transparent enough about the pandemic, Ramsunder said: “The key question is, do we have more questions than we have answers? Yes.”
But he said Clicks meets regularly with Business for South Africa, the business group that is facilitating communication with the government on its vaccination plan and Covid-19 response, so Clicks was getting feedback from the state in this way.
If Clicks were to provide vaccinations, it could drive frontshop sales through the increased number of people in stores, said Sasfin analyst Alec Abraham.
In Clicks’s half-year results,
UPD, which sells medicines to pharmacies and hospitals, was the standout performer. It grew total turnover, including sales to Clicks stores, by almost 19% to R13.2bn as the business gained new private hospital business, boosting its market share from 27.2% to 30.6%.
Its biggest hospital client, which Clicks did not name, renewed its delivery contract for another five years.