South African drugstore chain Clicks released positive results for the year ended August 31, 2020, despite incurring R44 million in costs related to Covid-19.
Vikesh Ramsunder, CEO of Clicks Group, says this was for personal protective equipment, store hygiene and deep-cleaning costs, protective consumables and additional data.
“We also paid some incentive bonuses to our staff, because transport was an issue so we made sure that we supported our staff so that they may be able to come to work during that period,” Ramsunder says.
He adds that the group will continue to have a base budget for Covid-19 expenses because the pandemic is expected to be an issue until a vaccine is found.
Covid protocols remain
“Even though we have moved to level one, we have not changed anything in terms of the measures we have in place to protect the staff and our customers from Covid-19,” Ramsunder says.
The group increased its final dividend 37.6% to R4.50 for the year to end-August.
It opened 39 stores to expand its retail footprint to 743 stores and increased its pharmacy network to 585 following the opening of 40 pharmacies. Group turnover increased by 9.6% to R34.4 billion.
“We are a proudly South African company. The population is still going to be requiring health and beauty products immaterial of Covid-19 or not. So we believe that we should become accessible, especially from a healthcare perspective, by opening up more stores,” Ramsunder says.
Retail sales grew by 7.3% and by 3.4% in comparable stores, with selling price inflation of 2.2%. Distribution turnover increased by 11.2% with price inflation of 2.5% for the year.
Increase in sales
Health and beauty sales – including Clicks and the international franchise brands GNC, The Body Shop and Claire’s – increased by 8.4%. This was supported by strong front-shop health sales growth during the pandemic.
Ramsunder points out that although beauty products such as colour cosmetics and fragrancies did not do well, there was increased demand for skincare products.
“But the real winners were baby and healthcare products. What I find interesting is that there was a lot of cooking during the lockdown because we sold a lot of electrical appliances as well. Our market share for appliances grew by almost 19%.”
The group’s online sales increased by 361% in the second half of the financial year, off a relatively low base. It says it is seeing the benefits of its investments in its e-commerce and digital platform over the past four years.
“The performance of the past year has again demonstrated that the group’s core health and beauty markets and business model are resilient,” Clicks says.
The group’s medicine distribution unit, United Pharmaceutical Distributors, grew by 11.2% and continued to gain market share after securing new wholesale and bulk distribution contracts.
The group says it expects the consumer environment to be extremely constrained in the year ahead owing to the continuing impact of Covid-19 and the socioeconomic challenges arising from the lockdown.
“The first half of the new financial year was initially impacted by protest action at Clicks stores in early September and will be further affected by the widespread job losses expected in the aftermath of the pandemic,” it says.
It pointed out that the business has traded well in weak consumer markets over a sustained period and has adapted to the new market dynamics arising out of the Covid-19 crisis.
“The group has maintained a robust balance sheet which generates strong cash flows, and the directors remain confident in the group’s ability to deliver on its medium-term targets,” it reports.
Its cash at year-end was R2.2 billion.
TRESemmé online advert saga
Following the racist TRESemmé advert posted online –which led to an explosion of protest on social media as well as actual protests at a store level – the group says the commencement of the new financial year was impacted over four days by the protest action.
“This protest action resulted in the group incurring losses in revenue, inventory, as well as additional costs and damages to several stores,” it says.
The group plans to submit a claim in terms of the group’s insurance policy for these incidents.