Clicks expects full-year profit to surge by over a third

But this excludes the potential impact of the recent floods in KwaZulu-Natal.
Clicks plans to open 28 additional stores during its 2022 financial year. Image: Supplied

Clicks Group is forecasting diluted headline earnings per share (Heps) for the full year ending August 31 2022 to grow by between 30% and 35%, up from the 773.6 cents it reported in the 2021 comparable period.

This forecast – which is highlighted in the group’s interim results published on Thursday – comes despite the healthcare retailer still expecting the general trading environment to remain challenging.

It noted that the trajectory of the Covid-19 pandemic remains uncertain and that load shedding will continue to disrupt trading operations.

Read: Clicks reports 26% rise in half-year profits

The country’s largest pharmacy and health retailer also noted that its forecast does not include any potential impact from the recent KwaZulu-Natal floods on the province’s economy.

Recovery in beauty category

The gradual relaxation of Covid-19 lockdown restrictions during the reporting period and  subsequent lifting of the state of disaster in the country has positioned the group’s beauty division for recovery, as more consumers return to the workplace and to social events.

According to Clicks, its beauty and personal care category has already begun registering this recovery, contributing 28.7% – the largest proportion – to the group’s retail sales performance, which grew 13.6% in the half-year.

Retail sales in the beauty and personal care category were 10.1% higher in the current period than the previous year – the highest change of all retail categories.

Clicks says it expects the category to continue seeing a recovery and contribute positively to the group’s growth over the second half of its 2022 financial year.

Covid-19 vaccinations to drop

Having been the largest provider of the Covid-19 vaccine in the private sector in the last two years, Clicks says it is now seeing a slowdown in foot traffic of consumers seeking vaccinations.

The group expects this drop  to continue into the second half of the year – despite the country now seeing a steady rise in Covid-19 positive cases and a looming fifth wave.

Having administered over three million vaccinations since the start of the vaccination programme, the retailer says it now expects to administer around 200 000 a month.

“I think we will probably do less than half the amount that we have done in the first half in terms of turnover and vaccinations,” CFO Michael Fleming said at the group’s interim results presentation on Thursday.

“We’ve also continued to right-size our footprint in terms of that as the decline in demand happens, so we effectively move the supply of those vaccines down in the stores or the clinics that we are offering them in.”

Reaction to the interims

Sasfin senior equity analyst Alec Abraham says the retailer stands to benefit from different segments of its business normalising.

He believes United Pharmaceutical Distributors (UPD) – a division of the Clicks Group – stands to benefit from this normalisation, especially after reporting a relatively muted performance this period.

“For the remainder of this year, they’ll [Clicks] definitely benefit from things normalising. I think the return to elective surgery in the private hospitals will mean that their UPD wholesale/drug sales to the hospitals will pick up,” says Abraham.

Expansion

Clicks confirmed that it plans to open 28 additional stores during its 2022 financial year. It currently has 800 stores.

The group’s high level of accessibility according to Abraham is one of the factors that gives it a competitive edge over its main competitor Dis-Chem.

Read:
Clicks continues expansion, plans to open 11 baby ‘showroom’ stores
Checkers joins battle for baby market share against Dis-Chem and Clicks
Clicks CEO Vikesh Ramsunder resigns to take up top job in Australia

Clicks has just under 600 convenience stores in its network and over 200 large-format stores.

“I think one of the competitive advantages that I believe Clicks has is the fact that they’ve got so many stores – the ubiquity. They are in all the strip malls and from a convenience point of view that’s quite important,” says Abraham.

“In terms of the large format stores they are very well represented, and they are very competitive with Dis-Chem, but where they have the advantage is those smaller convenience stores that are closer and are in those neighbourhood malls.

“So from that point of view I think there’s definitely further room for store openings in that convenience space where I must say Dis-Chem has been a little underwhelming in terms of their rollout of their convenience platform,” he adds.

Listen to Clicks CEO Bertina Engelbrecht speaking about the group’s interim results with Fifi Peters:

 

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