Clicks sees profit growth thanks to wholesale medicine division

‘The reason our performance remains quite strong is because we sell the things that customers require, even in a Covid world’: Outgoing CEO Vikesh Ramsunder.

RYK VAN NIEKERK: Retail and pharmacy group Clicks reported results for its financial year to the end of August today. Clicks is the second-largest retailer in the country according to its market capitalisation. It operates more than 780 stores and 620 pharmacies all around the country. Apart from the Clicks brand, the group also owns the nutrition brand, GNC, The Body Shop, pharmaceutical wholesaler UPD, and jewellery retailer Claire’s.

During the period the group’s revenue rose close to 11% to R40 billion. Headline earnings rose 1.3% to R1.9 billion, and the board declared a final dividend of R3.47/share – which means the total dividend for the year is R4.90/share.

Vikesh Ramsunder is on the line. He’s the CEO of Clicks. Vikesh, thank you so much for joining me. It was an interesting year, to say the least. How comparable are these results with the previous year’s set of numbers?

VIKESH RAMSUNDER: These results had quite a bit of headwinds in them. As you can understand, we were comparing 12 months impacted by Covid with six months in the previous year. So actually it was a lot tougher base to compare to. We had, you know, two disruptions – particularly the civil unrest in July. But I think the biggest impact for the year really was Covid, with second and third waves of infection. So it was really a tough year.

RYK VAN NIEKERK: Tough indeed, but there are so many clouds hanging over our economy owing to the impact of Covid and the unrest. We have record high unemployment and many people are negative about the future of the country – yet the retailers seem to be doing really, really well in this environment. How do you see this apparent discrepancy?

VIKESH RAMSUNDER: If I speak for our business, if you consider the categories we sell, they’re not really discretionary categories. You need the products that we sell. So, if I look at what’s driven our performance for the year, it’s predominantly healthcare in terms of nutraceuticals and preventive healthcare, since people were concerned about their wellbeing because of Covid-19.

Baby did exceptionally well, almost 15%. Baby doesn’t care that there’s Covid. It’s actually a very defensive business model. The categories that struggled were in beauty, clearly, with colour cosmetics being minus 6% with ladies using masks and so on. So the fact that we have such a diversified portfolio of products means that we were able to maximise on the challenges, in a way, which presented themselves for the year.

Really I would say the reason why our performance remains quite strong is because we sell the things that customers require, even in a Covid world.

RYK VAN NIEKERK: I think maybe government grants also had something to do with it. But it’s an interesting anomaly. Let’s talk about the looting and the unrest we saw in July. What was the impact on Clicks?

VIKESH RAMSUNDER: Well, we put an insurance claim through for R726 million, so that was material to our earnings. We had 53 stores impacted and both our distribution centres were looted. So the operational challenges to get our business up and running once again were quite significant, but the teams did an exceptional job. UPD [United Pharmaceutical Distributors] was up and running in two weeks, and the Clicks DC [Distribution Centre] in a month. As we stand here today, I have eight stores that have not opened. The biggest challenge that we do have is those 45 stores. Even though they opened, the sales haven’t returned to the levels that they were before the unrest. I think that will probably continue for the next six months of the current financial year.

RYK VAN NIEKERK: The stores that haven’t been opened – are you planning to open them, or are you maybe taking a cautious approach?

VIKESH RAMSUNDER: No, no. We are certainly planning to open them. If you’ve known me for a while, I think we still remain positive around the business and our growth opportunities. We’ve opened 45 and we’ll certainly open the other eight. The reason why we haven’t opened them is purely because the infrastructure needs to be sorted out. The centre has to be rebuilt to some degree. Seven of those will open in this financial year and one will open in the following financial year – so we definitely plan on opening them.

RYK VAN NIEKERK: During the year you also opened 38 new Clicks stores, [and] another 36 pharmacies. Was that the target?

VIKESH RAMSUNDER: The target was actually 40 Clicks stores, and so we missed it by one, and we wanted to get close to 40 pharmacies as well. The challenges were, of course, a lot of our resources then went into opening up the damaged shops. If you really want to know, we opened kind of 39 new store spots, and we opened another 45 damaged stores in the year. So we actually did a lot more, if you look at it that way.

RYK VAN NIEKERK: And how many are you planning to open this year?

VIKESH RAMSUNDER: Well, our guided range is 25 projected new stores, and 30 to 35 new pharmacies. But we always have significant opportunities. Typically over the last few years we’ve been running at just over 40 stores a year, and I don’t see any reason why that wouldn’t continue this year if the opportunities come up.

RYK VAN NIEKERK: Dis-Chem acquired Baby City recently, and you’ve opened the new Clicks Baby. I don’t know if it’s a franchise or a brand. Tell us about Clicks Baby.

VIKESH RAMSUNDER: Clicks Baby is a showroom store for baby accessories. Our strategy is divergent to Dis-Chem’s. Dis-Chem is focused on a specialist destination baby store. Now honestly, I don’t have to do that. I have 782 Clicks stores that sell baby products today. What I can’t put into my Clicks stores today are big, bulky items like car seats, cots, prams and so on. We sell those products online.

So what these baby specialist stores do, is they allow mom to be able to touch and feel the products before they buy them, because these are bulky items. You’re going to deliver them to the customer, anyway. They are ideal for online purchasing and delivery.

So effectively we are setting up 11 showroom stores at destination malls across the country. We strategically believe that, like we’ve seen in most markets around the world, baby hardware will be bought online in the future.

RYK VAN NIEKERK: And then just lastly, I think this is probably our last interview as you are leaving for greener pastures in Australia early next year and you’ll be leaving Clicks in December after 18 years in the management of the company. Are you sad to leave Clicks in South Africa?

VIKESH RAMSUNDER: I’ve been here 28 years now, Ryk. I started as a cashier in the business. So it’s the only company I’ve ever worked for; I’ve given my life to the group. After 28 years, I thought I was allowed to change jobs once, so I took up the opportunity.

I’m really sad. If I have to say to you today, this being my last results presentation, it’s quite an emotional day. I’m actually feeling quite sad, I guess, leaving the company and definitely leaving South Africa.

RYK VAN NIEKERK: Well, hopefully you’ll be back in the not too distant future. But Vikesh, thank you so much for your time. That was Vikesh Ramsunder, the CEO of Clicks.

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A business run by people who know and understand the needs of consumers, not only recently, but for years

Well done Clicks! May you keep going from strength to strength

Ehh

No pandemic slips by without some good profit growth.. business always before anything no?

It’s called Capitalism, something the ANC and EFF hate, but loot our taxes to enjoy a the lifestyle of the Capitalist

Ever seen a Communist/Socialist living like a pauper starving to death?

Uncle BOB up north amassed so much from his people, it will last for generations within his family

Yea Steve,

What lending rate do you give your mother? She qualifies for prime from you? Prime +2 ?

Don’t tell me you are a socialist and share money with her?

Clearly most people are socialist at local/family level.

Funny China outwits the west at its own game of monopoly. No other capitalist country ever achieved the growth and poverty reduction in such a short time as from late 1990’s.

To shout one or the other ism as absolute truth shows dept of intellect.

and so does celebrating the windwallI from a global pandemic, that in my opinion did not really require the company to exert a lot of skill…

He has done a great job-a shame he has a need to tell all about his wife s Gucci handbags at internal meetings but then look where he started

End of comments.

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