Capital investment of R920m planned as it aims to open at least 50 new outlets this financial year
25 April 2024 - 08:49
UPDATED 25 April 2024 - 19:53
by Michelle Gumede and Jacqueline Mackenzie
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Clicks is continuing to expand its store footprint, targeting a total of 1,200. Picture: THAPELO MOREBUDI/SUNDAY TIMES
Cash-flush Clicks, which has earmarked nearly R1bn in capital investment for the 2024 financial year, says it is set to speed up its store expansion programme by opening as many as 55 new outlets.
As part of its growth strategy aimed at increasing its store base to more than 1,200 in the long term — with a pharmacy operating in every store — Clicks previously set a target of 40 to 50 new shops each year.
On Thursday the JSE-listed group said it “plans to accelerate its store expansion programme by opening 50 to 55 stores for the 2024 financial year. A further 10 to 20 pharmacies are planned.”
The acceleration of its expansion comes as it looks to cash in on the momentum of the past six months, when it gained market share across the retail health and beauty categories, grew private-label products, strengthened margins and generated robust cash flows.
The health and beauty retailer grew earnings 13% at the halfway stage amid strong turnover and profit growth in a tough trading environment.
Group turnover for the six months ended February increased 9% to R21.8bn while retail turnover, which includes Clicks, GNC, The Body Shop and Sorbet corporate stores, increased by 12.4%, the group said in a statement on Thursday.
Distribution turnover growth of 1.3% was affected by the systems implementation at the main UPD distribution centre.
Total income grew 14.1% to R6.6bn, with headline earnings per share (HEPS) rising 13% to 534c.
Group operating profit increased by 13.5% to R1.9bn and the operating margin increased by 30 basis points to 8.5%. Profit for the period was 10.4% higher at R1.27bn.
An interim dividend of 210c per share was proposed.
The group attributed the performance to its resilience in overcoming headwinds in the trading environment.
Profit growth was driven primarily by higher demand in the beauty and personal care categories, supported by the Clicks ClubCard loyalty programme, which has grown to 11-million active members, with 1-million coming in over the past year.
To support the acceleration of the store rollout, a capital investment of R920m is planned for the 2024 financial year ending next August, up from the R880m it outlined in October. Clicks said about R514m of that was to be set aside for new stores, pharmacies and store refurbishments.
So far, R314m in capital expenditure has been reinvested in new stores and pharmacies, renovations, supply chain management and information technology.
Having opened 41 new stores in the past year, Clicks now owns 902, opening its 900th in February. A further 27 pharmacies were opened, extending the national pharmacy presence to 718.
The Cape Town-based company was upbeat about its growth but cautioned that consumer spending would remain constrained because of inflationary pressures. Potential disruption ahead of the general election in May and the resumption of load-shedding were also flagged as risks to the trading environment.
While Clicks, which now owns Sorbet, M-Kem and software development company 180 Degrees, has traditionally targeted mainly middle- to upper-income consumers, its strategy in recent years has been to extend its market and presence in lower-income areas.
The group owns 49 stores in neighbouring countries.
Capital investment
About R406m of its overall capital investment is set to be focused towards investment into supply chain, technology and infrastructure, including the ongoing investment in renewable energy solutions. Clicks said it has so far invested R36m in renewable energy, including the recent installation of additional solar panels and battery storage at the head office and pharmaceutical wholesaler UPD’s main distribution centre.
It reported that interim cash generated from operating activities before dividends paid was R1.1bn. At the end of February, Clicks held cash resources of R853m.
The acquisitions of Sorbet, M-Kem and 180 Degrees, which were completed in the previous financial year, had been successfully integrated into the group’s operations and were performing ahead of pre-acquisition expectations, it said.
UPD is expected to deliver a stronger second half. It “is now positioned for growth following the completion of the large-scale systems implementation early in the reporting period and to benefit from the higher increase in the regulated single exit price of medicines relative to the prior year”, Clicks said.
UPD’s strategy of rationalising its bulk distribution portfolio to focus on profitable clients has adversely affected turnover through the non-renewal of two contracts. The strategy was, however, expected to benefit margins and support the acquisition of profitable new clients.
The group returned R2bn to shareholders in dividend payments and share buybacks in the six months, bringing the total since 2006 to R19.1bn.
By market close Clicks shares had fallen 0.69% to R284.77, giving it a market cap of R67.8bn. The share price has gained 16.7% in the past six months.
Update: April 25 2024 This story has been updated with more information.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Clicks to speed up its expansion
Capital investment of R920m planned as it aims to open at least 50 new outlets this financial year
Cash-flush Clicks, which has earmarked nearly R1bn in capital investment for the 2024 financial year, says it is set to speed up its store expansion programme by opening as many as 55 new outlets.
As part of its growth strategy aimed at increasing its store base to more than 1,200 in the long term — with a pharmacy operating in every store — Clicks previously set a target of 40 to 50 new shops each year.
On Thursday the JSE-listed group said it “plans to accelerate its store expansion programme by opening 50 to 55 stores for the 2024 financial year. A further 10 to 20 pharmacies are planned.”
The acceleration of its expansion comes as it looks to cash in on the momentum of the past six months, when it gained market share across the retail health and beauty categories, grew private-label products, strengthened margins and generated robust cash flows.
The health and beauty retailer grew earnings 13% at the halfway stage amid strong turnover and profit growth in a tough trading environment.
Group turnover for the six months ended February increased 9% to R21.8bn while retail turnover, which includes Clicks, GNC, The Body Shop and Sorbet corporate stores, increased by 12.4%, the group said in a statement on Thursday.
Distribution turnover growth of 1.3% was affected by the systems implementation at the main UPD distribution centre.
Total income grew 14.1% to R6.6bn, with headline earnings per share (HEPS) rising 13% to 534c.
Group operating profit increased by 13.5% to R1.9bn and the operating margin increased by 30 basis points to 8.5%. Profit for the period was 10.4% higher at R1.27bn.
An interim dividend of 210c per share was proposed.
The group attributed the performance to its resilience in overcoming headwinds in the trading environment.
Profit growth was driven primarily by higher demand in the beauty and personal care categories, supported by the Clicks ClubCard loyalty programme, which has grown to 11-million active members, with 1-million coming in over the past year.
To support the acceleration of the store rollout, a capital investment of R920m is planned for the 2024 financial year ending next August, up from the R880m it outlined in October. Clicks said about R514m of that was to be set aside for new stores, pharmacies and store refurbishments.
So far, R314m in capital expenditure has been reinvested in new stores and pharmacies, renovations, supply chain management and information technology.
Having opened 41 new stores in the past year, Clicks now owns 902, opening its 900th in February. A further 27 pharmacies were opened, extending the national pharmacy presence to 718.
The Cape Town-based company was upbeat about its growth but cautioned that consumer spending would remain constrained because of inflationary pressures. Potential disruption ahead of the general election in May and the resumption of load-shedding were also flagged as risks to the trading environment.
While Clicks, which now owns Sorbet, M-Kem and software development company 180 Degrees, has traditionally targeted mainly middle- to upper-income consumers, its strategy in recent years has been to extend its market and presence in lower-income areas.
The group owns 49 stores in neighbouring countries.
Capital investment
About R406m of its overall capital investment is set to be focused towards investment into supply chain, technology and infrastructure, including the ongoing investment in renewable energy solutions. Clicks said it has so far invested R36m in renewable energy, including the recent installation of additional solar panels and battery storage at the head office and pharmaceutical wholesaler UPD’s main distribution centre.
It reported that interim cash generated from operating activities before dividends paid was R1.1bn. At the end of February, Clicks held cash resources of R853m.
The acquisitions of Sorbet, M-Kem and 180 Degrees, which were completed in the previous financial year, had been successfully integrated into the group’s operations and were performing ahead of pre-acquisition expectations, it said.
UPD is expected to deliver a stronger second half. It “is now positioned for growth following the completion of the large-scale systems implementation early in the reporting period and to benefit from the higher increase in the regulated single exit price of medicines relative to the prior year”, Clicks said.
UPD’s strategy of rationalising its bulk distribution portfolio to focus on profitable clients has adversely affected turnover through the non-renewal of two contracts. The strategy was, however, expected to benefit margins and support the acquisition of profitable new clients.
The group returned R2bn to shareholders in dividend payments and share buybacks in the six months, bringing the total since 2006 to R19.1bn.
By market close Clicks shares had fallen 0.69% to R284.77, giving it a market cap of R67.8bn. The share price has gained 16.7% in the past six months.
Update: April 25 2024
This story has been updated with more information.
mackenziej@arena.africa
gumedemi@businesslive.co.za
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