Future ‘Clicks’ into place for retailer post-Covid
Clicks says it is well-placed to benefit from consumers’ desire to shop at small centres with fewer people.
About 70% of Clicks’s 700 stores are in small neighbourhood centres, many within a 5km radius of consumers. It plans to expand to reach 900 stores in a few years.
The retailer said it had fewer customers at large shopping malls and “experienced a decline in the frequency of customer visits during the lockdown, while the average basket value has increased over this time”.
The decline in the number of people at “super-regional and regional malls across the country has impacted sales in destination stores”.
The cosmetics and medicine retailer recorded a 10.2% increase in sales year on year for 23 weeks between March and August 9, even as stores Musica and The Body Shop and accessory brand Claires were closed in April due to lockdown.
For the 49 weeks to August 9, its group turnover increased by 10.0% to R32.3bn.
Breaking ranks with most food and drug retailers, Clicks announced it will pay a final dividend at year-end. Most companies have held on to cash to shore up their balance sheets to cope with the coronavirus pandemic expenses and reduced consumer demand.
Clicks didn’t pay a half-year interim dividend in April, citing “uncertainty” due to the pandemic. Clicks’s policy of paying an annual dividend worth 60%-65% of headline earnings per share means its dividend will account for not paying in April.
“The full-year payout basically puts them back on track after suspending the interim dividend. The yearly payout is generally 60%-65%,” said Gryphon analyst Casparus Treurnicht. Its 2019 dividend was 445c a share, up 17.1% from the year before.
Diluted headline earnings per share (Heps) for the year to end-August are expected to rise by between 10% and 15% from the prior period’s 663.6c — which has been restated due to accounting changes. The group had previously reported diluted Heps of 672.2c for its 2019 financial year.
Despite the dividend, Treurnicht still felt the share price of R239,99 was expensive. “At the same time, it’s one of the few companies that maintained good sales growth over the past few years, even through the Covid-19 pandemic.”
On dividend value as a percentage of the share price, he said: “The yield is also very low. It is not a share offering much value to me.”
Wayne McCurrie, of FNB’s Wealth and Investments, said Clicks “is an extremely good operation and the share is expensive for a very good reason. They are very successful at what they do.”
Clicks said in a trading update it had seen “significant” growth in online sales in recent months. The lockdown has resulted in an increase in online shopping as people observe social-distancing rules to curb the spread of the coronavirus.
The group said its medicine distribution unit, United Pharmaceutical Distributors (UPD), fared well in 2020, increasing turnover by 11.7%, having benefited from gaining new private hospital and buying group contracts. The wholesale medicine supplier sells to hospitals and independent pharmacies.
However, in-store pharmacy sales took a hit as the country has not experienced a traditional winter cold and flu season, which is generally a strong driver of sales growth.
“The incidence of colds and flu has been limited as South Africans are wearing face masks during the pandemic, social interaction has been limited, schooling restricted and large numbers of people are working from home,” the statement said.
Clicks’s share price was up 4.99% to R239,99, having fallen 8.82% so far in 2020.
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