Clicks invests more in small suppliers
Clicks says it has ramped up its support for small and medium-size businesses fourfold in the past six months, but the company says this was not influenced by the hair brand TRE-Semmé fiasco.
Clicks CEO Vikesh Ramsunder said this week that the TRESemmé debacle in September last year may have highlighted a fault in its internal approval process, but the group is committed to transformation.
“We are not racist, but it should not have landed on our platform,” he said.
In September last year, Clicks came under fire after an advert for TRESemmé referred to black hair as damaged and white hair as normal, causing an outcry.
Ramsunder said the group is committed to transformation and has supported local small and medium enterprises for the past 10 years.
He said that 93% of Clicks staff are black and almost 77% are women.
Ninety-two percent of the items the group sources are from local suppliers, he said, and only 8% are imported.
He did concede that some of the suppliers are multinationals that may import products from other markets.
The group has quadrupled its investment in small and medium enterprises in the past six months, from R10m to R40m, he said.
This includes an investment in local haircare brand Afrobotanics, which is exclusively available in Clicks’ 840 stores nationwide.
“Our ambition is to source as many local products as we can,” he said.
Other local brands the group stocks include Heavenly and Sorbet.
The retail group released its financial results for the six months to February 2021 this week, reporting a 9.7% increase in operating profit to R1.4bn.
Sales for the health and beauty range grew 7.2%, with sales of hair-care products increasing 22% in the past six months, he said.
“A strong performance if you consider the effect of Covid-19 and that 2020 was a leap year,” said Ramsunder. The pandemic affected the pharmacy division, with a tepid 3% growth.
Ramsunder attributed this to people avoiding shopping malls and favouring their local pharmacies, which they deemed safer to visit.
He said he expects the pharmacy division will be affected by a “muted cold and flu season”, as the wearing of masks and the vigilant use of hand sanitisers will reduce the probability of the flu virus being as prolific as in prior years.
He said his most important objective currently is to support the government in the rollout of the Covid-19 vaccines. “None of us are safe until all of us are safe,” he said.
If the government agrees to use the Clicks network of stores to administer vaccines, the company will seek out the services of about 400 additional nursing staff and pharmacists to assist with administering the vaccine in its 190 clinics.
Its retail network of 600 pharmacies is also available for use, he said.
Alec Abrahams, senior equity analyst at Sasfin, said Clicks is a very well-run business.
The chain, he said, manages its cash flow well, consistently offers good returns over time and keeps what he called a “shallow and narrow” range. This helps the business better control its stock and increases opportunity for stock rebates from brand managers because suppliers are fighting for shelf space in the stores.
Casparus Treurnicht, research analyst and portfolio manager at Gryphon Asset Management, said Clicks “published a reasonable set of results”.
But he noted that there is barely growth happening in its existing store base.
“They seem fixated on using the current economic environment to accelerate store rollouts over the short term by occupying vacancies while they are still there,” said Treurnicht.
He noted that Clicks’ competition is gaining market share “little by little”.