Money&investing
Clicks than some of his peers, arguing that “institutional” pharmacy groups have very little room to expand as the final independents are taken out. “That growth vector is disappearing. And at an almost 40 p:e, Dis-Chem and Clicks are priced for perfection.”
Alec Abraham, senior equity analyst at Sasfin Securities, says investors need to remember that the bigger a company gets, the more stores it opens, the less each marginal store contributes. For this reason, he feels that Dis-Chem has better growth opportunities as an investment.
Clicks has also been able to flatter its historical growth rate by buying back shares, says Abraham.
“Consistency is really what you’ve had out of the business all along. Is that consistency going away? I don’t think so. Will that growth slow down? I don’t think so. The marginal accretion from every store is just much less.”
He points out that Clicks and Dis-Chem’s growth is intrinsically tied to consumer spending, which in turn is tied to an economy “in desperate need of structural change”.
Abraham says SA needs to grow 6%-8.5% to make any real difference to unemployment and spending. A tough ask, especially as inflation and interest rates are expected to surge.
Abraham’s big concern is that with the ANC elective conference coming up in December, there will be plenty of jockeying for position, but no-one will have their hands on the wheel. “We will be in for a very tough time. That will be a major cap on even a defensive stock like Clicks,” he says.
In the trading update, Clicks said its retail health and beauty sales, including Clicks franchise brands The Body Shop, GNC and Claire’s, were up 14.4% for the 20 weeks to January 16.
Total managed turnover at United Pharmaceutical Distributors (UPD) was up 10.1% and group turnover was up 10.4% to R15.1bn.
Newly appointed CEO Bertina Engelbrecht said Clicks administered 1.8-million vaccines during the period, “generating sales of R685m, an uplift of 6.9% to retail sales”.
Last year the second wave drove higher sales of preventative health-care products including supplements, immunity-building vitamins, masks and sanitisers, while the impact of Omicron this year “was less severe and resulted in lower purchases of medication and immune support products”.
The group said both Clicks and UPD have continued to gain market share.