The owner of Claires and The Body Shop, plans to open 25 new stores and refurbish 65 outlets in 2017, while increasing space in 18 of those stores and expanding two of its distribution centres. But one fund manager believes that the expansion of Clicks' presence in healthcare and beauty segments should also see it offload noncore brands such:D: as Musica.
Suvasha Kander, a fund manager at Ashburton Investments, said although Clicks' results exceeded overall consensus, the sale of noncore assets such as Musica, should be on the cards for the company.
"Musica has become a small component of their overall business and the landscape has changed for that kind of business, in the sense that now a lot of people would download music and the likes and not walk into a Musica," Kander said.
"I'm not sure if it would be up for sale, but it would also be difficult to get a suitable price for the business, given where the industry has moved and evolved to."
But Kander said whether or not Clicks sold Musica was not "too much of a worry".
In the group's full-year results to end-August, Clicks reported group turnover growth of 9.5% to R24.2bn with diluted headline earnings per share gaining 14.2% to 438.5c. The total dividend increased 15.7% to 272.0c per share and together with the growth in the Clicks Group share price over the past year represents a total shareholder return of 35.3%.
Clicks CEO David Kneale said that it had always been part of the group's plan to have pharmacies in all its stores.
"The goal has always been that over time, every Clicks store will have a pharmacy - 80% of them do now... so we'll close that gap over time," he said.
"Health and beauty are resilient categories in a tough economic climate. You may not choose to buy the new dress but you still buy the lipstick."
But he shot down suggestions of a possible Musica disposal, saying "the business is profitable and is cash-generative".
Retail health and beauty sales for the period including Clicks and the franchise brands of The Body Shop, GNC and Claire's, increased by 13.5%, while UPD grew turnover by 6.1% in a pharmaceutical market which has shown minimal volume growth.
Kneale said: "We were very clear that this was going to be a challenging year for UPD with little volume growth in their pharmaceutical market.
"Despite those pressures UPD has maintained its operating margins.
"We believe that we've got an organic growth story in terms of opening more Clicks stores "¦ our strategy is to grow organically," he said.
In the past year, Clicks shares have risen more than 20% making it the best performing stock on the FTSE-JSE Africa Food & Drug Retailers index, according to Bloomberg data.
Clicks' shares were trading more than 2% higher at 2.55pm.
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