Clicks's marketing push drives double-digit growth
Clicks on Thursday reported growth of 13.4% in retail sales for the six months to end-February, while turnover increased 13.4% to R12.1bn. Aftertax profit grew 16% to R509m.
Sasfin Wealth senior equity analyst Alec Abraham said the company had been aggressive in its marketing, which had helped it to gain market share.
"The group’s sales are well ahead of other retailers of its kind. Their promotion strategy is working very well for them. The results themselves were perfectly in line with expectation," Mr Abraham said.
ClubCard membership, its loyalty programme, increased by almost 1-million, bringing total membership to 5.7-million active customers.
Clicks said its businesses had performed particularly well over the festive and holiday season, with customers responding positively to value offers and innovative product ranges.
Group CEO David Kneale said Musica, in particular, had flourished during the festive season. "We used a pop-up store concept that consumers seemed to love. It’s a concept we intend to use again.
"We continue to believe that there is a market for the physical formats of music and DVDs. We have absolutely no intention of selling (Musica) off," he said.
Musica increased sales 3.4%. Kneale said technology products such as speakers and headphones proved popular.
Retail health and beauty sales including Clicks and the franchise brands of The Body Shop, GNC, and Claire’s, increased 14.1% for the six months.
UPD, the group’s pharmaceutical distribution business, grew turnover by 12.8%.
The retailer declared an interim dividend of 76c, a 16% increase from the matching period last year.
The group would spend about R455m on capital expenditure this financial year, Kneale said
"The two big components of that will be the opening of new stores and information technology investment. We are opening new stores at a rate of 20-25 stores a year. We will also invest in existing stores so that they continue to look modern, fresh and appealing to our customers," he said.
Clicks share price touched an intraday high of R109.30 on Wednesday. By yesterday afternoon, it was trading lower, at about R105.50.
"It’s a steady performer and it has consistently moved up. Generally, the view is that it is fully valued. The share pulled back on Thursday but that’s to be expected," Abraham said.
Clicks is part of the food and drug retailers index on the JSE. Year to date, the index has seen growth of 16.48%, far ahead the all share, which has risen 6.17% this year. The growth comes despite pressing conditions in the South African economy.
Clicks said its core health and beauty markets "are relatively resilient to economic downturns". The directors forecast that diluted headline earnings per share for the year to August would increase 10%-15% over the 2015 financial year.
Source: I-Net Bridge
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