Clicks sets a fine example

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The group, which released its trading update for the 20 weeks to January 15 on Thursday, said group turnover grew 8.6% to R10bn, while retail sales rose 12.2% and 8.5% in comparable stores, with selling price inflation averaging 5.3%.

CEO David Kneale said the company had always been a promotions-orientated retailer and that consumers responded well to promotions in health and beauty. "We’ve become famous for the three-for-two [offer] and we didn’t do any more discounting than we had planned to do.

"We set out with a strong value offer ... we also anticipated that if customers aren’t buying gifts, they will still buy lipstick and they will still buy fragrance and suncare [products], which they did," said Kneale.

Clicks owns brands such as The Body Shop, Claires and music retailer Musica.

The Clicks pharmaceutical wholesaler and distribution business UPD increased its turnover 6.4%, ahead of selling price inflation, which averaged 4.3% for the period.

Kneale said the retailer opened 15 new pharmacies in the period, which also strengthened the group’s position in healthcare.

Victor Dima, an equity analyst at Dubai-based Arqaam Capital, said for Clicks, things were going in the right direction. "It’s not a big surprise because it continues to be relatively strong, part of which is due to the fact that the pharmaceutical retail market is strong, despite the overall market being weak."

He said part of the reason for the performance was internal store inflation, which helped overall performance and improved UPD’s performance from the second half of last year, "so we see an acceleration of growth over 6%".

Clicks gained about 42.97% on the JSE over the past year.

Bright Khumalo, a portfolio manager at Vestact, said the group’s volume growth was impressive considering the economic environment. "Many retailers wish they were [in Clicks’s position] at this point."

Khumalo said focus on the beauty and health sector had more "resilient products such as health and beauty products ... more people are willing to cut their food budget before they cut their beauty budget".

Kneale said although he was not privy to the details of financial pressure on consumers, prices were still high and inflation was at 6.8%, so consumers were looking for value. "But I am confident that we’ll maintain our competitive position."

Clicks expects to open 30 new stores in 2017. In December 2016, it assumed control of 37 Medicross pharmacies in a deal with Netcare and rebranded them as Clicks.

"Next week, we will take over the running of the front shops in Netcare hospitals, which will add another 40 stores to the Clicks portfolio."

The Clicks share price closed 0.63% higher at R120.35 on the JSE on Thursday.