Clicks’ new strategy bets on baby boom

• Pharmacy group and retailer is opening 11 new baby stores in large malls to capitalise on the birth of 1-million babies a year

Pharmacy group and retailer Clicks is optimistic about growing its store footprint and sales in SA despite what it describes as constrained consumers and tough trading environment.

In a new strategy, it is opening 11 new baby stores in large malls that will showcase bigticket items such as prams and cots, in a bid to capitalise on the birth of an average 1-million babies a year. The first store recently opened at Umhlanga’s Gateway mall.

Three-quarters of its Clicks retail stores are in smaller convenience centres, which are growing in popularity as consumers want to shop close to home, but the baby stores are mostly in larger malls.

The group, whose share price is often described by analysts as very expensive, reported record adjusted operating profit for its 2021 year.

Overall operating profit for the group, including Body Shop stores, Clicks stores and pharmacies, increased 8.2% to exceed R3bn for the first time, when adjusted for the effects of the civil unrest in July. This means the operating profit reflects the expected insurance payouts for the losses incurred by looting and store closures during the riots in KwaZuluNatal and parts of Gauteng.

However, headline earnings, a measure of profit from continuing operations, grew a meagre 1.9% to R2bn when the loss in sales and theft in the civil unrest is not accounted for.

‘HEARTBROKEN’

Outgoing CEO Vikesh Ramsunder said he saw future growth in areas where Clicks is not yet dominant, such as personal care products and baby goods, including nappies and wipes in ordinary stores.

It wants to grow its 782-store network to 900.

Ramsunder will be leaving after 28 years at Clicks and three years as CEO saying he is “heartbroken” after taking an opportunity at a similar company in Australia.

He started at Clicks working as a cashier.

“I obviously understand the business intimately and am thankful for the opportunities this group has given me.”

As concern mounts over a flight of skilled people from SA and the need to import foreign CEOs to run retail businesses such as Massmart and Pick n Pay, Ramsunder said he made the decision to leave because a personal opportunity came knocking.

After 28 years in the same company, which was the leader in health and beauty retail, he was approached by a health retailer Down Under, he said.

“If I wanted to change jobs once in my life, it wouldn’t make sense to have to do that in a different market. And it just so happened that this company approached me and I thought it was a good opportunity.”

MATURING

For the year ending in August, Clicks wholesale medicine business UPD delivered yet another strong performance with a 15.1% increase in revenue, growing its market share to just over a third, as drug sales to private hospitals picked up during SA’s second and third waves of Covid-19.

However, its UPD business is maturing and will see slower growth, in future, Clicks said.

The group’s retail same-store sales grew 5.1% above its 3.2% price increase reflecting an almost 2% growth in volumes. Annual growth in the number of products sold, while small, is in stark contrast to that of many food retailers, which have been growing revenue at the rate of price inflation. The group declared a total dividend of 490c per share.

Ramsunder warned of future tough operating conditions but said the group is pinning its hopes on widespread vaccinations, offering a return to more normal conditions. SA aims to have 60%-70% of adults vaccinated by December but is struggling to reach this target, prompting calls from business leaders to speed up the process.

“Clicks has the capacity to administer 600,000 vaccinations per month and will continue to play a key role in supporting this national priority,” Ramsunder said.

The convenience of the Clicks pharmacy network has been instrumental in supporting the national Covid-19 vaccination programme in which it has administered 1.4-million vaccinations.

By close of trade on Thursday, the group’s shares were trading 2.73% lower at R270.50.

I UNDERSTAND

THE BUSINESS

INTIMATELY AND AM

THANKFUL FOR THE

OPPORTUNITIES THIS

GROUP HAS GIVEN ME

Vikesh Ramsunder Clicks outgoing CEO