Clicks. Picture: SUPPLIED

CEO Vikesh Ramsunder says its long-term strategy will be maintained despite the short-term crisis

Retail group Clicks will continue with its plans to open new stores and pharmacies, despite the health and beauty company expecting consumers to be cash- trapped after the Covid-19 pandemic lockdown.

The group, which wants to grow its total stores to 900, reported an “unprecedented” surge in sales as customers stocked up on health care and hygiene products.

“The long-term strategy has not gone out of the window for a short-term crisis,” said CEO Vikesh Ramsunder.

SA is in a five-week lockdown because of the coronavirus, which has halted economic activity. Only essential service providers such as Clicks are allowed to operate.

Clicks planned to open 38 new Clicks stores and 40 pharmacies in the financial year.

“I fully understand the future may be more difficult but it may create more opportunities,” Ramsunder said.
Ramsunder said he last week signed a lease for a store in a shopping centre that Clicks had tried to enter for 10 years and now space had become available.  

The company reported a 12.9% rise in profit for the six months to February to R850m. Headline earnings per share were up 14.4% to 338.4c over the half-year period.

Clicks retail stores increased turnover by 8.6% to R12.3bn while income rose 7.7%  to R4.1bn. Clicks’ wholesaler business, UPD, which distributes medicines to a hospital group, independent pharmacies and to Clicks stores, reported a 12.3% increase in turnover to R7.4bn while income rose 14.2% to R601m.  

For the seven weeks to April 19, UPD’s turnover grew by 31.2% due to customers preparing for the Covid-19 impact. It has excess medicine stock after making a decision to buy extra drugs when the coronavirus hit China amid concerns over supply chain disruptions from countries in the East that manufacture medicines.

“We started planning when coronavirus hit China not when it hit SA,” Ramsunder said.

Despite reporting overall double-digit growth in earnings, the group decided not to declare an interim dividend. Ramsunder said Clicks did expect a difficult period in the short term and had withheld paying a dividend to ensure they kept more cash on hand. “The outlook is frankly a cautious view. What the months ahead will hold, we just don’t know.” 

Like other retailers, Clicks groups is negotiating with landlords about rental reductions for its Musica, Claire’s and The Body Shop stores, which have not traded in April. Clicks had paid its April rent.

Musica is under pressure as it relies on discretionary spending, Ramsunder said.

Asked whether Clicks would use this crisis to renegotiate lower rents, Ramsunder said Clicks had negotiated lower rental escalations but had to honour all existing rental contracts with landlords.  

Clicks shares closed 2.72% down at R260.45. It still remains an expensive share with a price-earnings ratio of 38, said retail analyst Alec Abraham.

Article Source: https://www.businesslive.co.za/bd/companies/retail-and-consumer/2020-04-23-clicks-to-keep-expanding-despite-poor-economy/