A solid set of interims from Clicks for the six months through February, with Group turnover +9.0% to R19.6bn, and operating profit +7.5% to R1.5bn. This was boosted by further SASRIA insurance payments following the July 2021 unrest, with 53 stores needing repairs and being something of a drag on CAPEX. Performance was also boosted by the rollout of COVID-19 vaccinations, and the key categories of pharmacy and front shop health showed strong continued growth. Beauty and personal care roared through, growing +10.1%, indicating that beauty products – especially colour cosmetics at +12.6% – will be a mainstay of post-pandemic growth. On the downside, a slight decline in the baby category due to import delays is a bit of a worry, as rivals Dis-Chem and Checkers rollout their specialist baby stores. And UPD’s -3.6% decline in turnover was disappointing, too. Online sales remained steady at 1.3% of retail sales, another area for future effort as South African punters continue to embrace e-commerce.

Comment: For a more comprehensive take on these results, have a look at the excellent summary provided by our Research team over <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/169463/220428_Clicks%20HY2022%20Results%20Summary.pdf">here</a>.

We’ve had occasion to remark, over the years, on the driving pace and relentless schedule of Clicks’ store-opening regime and noted recently with admiration that it had just opened its 800th store. What we haven’t explored, so much, is the location of these stores. For example, how 30% of the Group’s stores are situated in lower-income communities where their sales grow faster than the stores located in mid- to upper-income suburbs. The idea, says managing executive Vikash Singh, is that all South Africans will have access to what the retailer has to offer – from collecting medication to purchasing cosmetics – without having to worry about transport costs. Fortunately for Clicks, which aspires to having a store within five kilometres of each and every South African (it’s currently at six kilometres), malls and strip malls are opening hand over fist in lower-income communities. The business is currently on track to open 25 to 30 new stores annually and meet the target of 900 by 2026.

Comment: Both quality, and quantity then. Nice one, Clicks.

A very complicated Patent Court battle this week between Bayer South Africa and Clicks, about the latter’s ability to sell a mere 2,963 packs of blood-thinning pills from Bayer rival Dr Reddy. One of the issues for Bayer is that various pharmacies – including Clicks and Dis-Chem – had continued dispensing Dr Reddy’s Rivaxored generic pills at 40% below the price of Bayer’s Xarelto pills. Bayer obtained an interdict earlier to prevent the distribution of this and other generics. For Bayer, the continued sale of generics is a major threat to the single-dose medication they had invested heavily in developing. At stake for Clicks is its agenda “to make healthcare services more affordable – and thus accessible – to all people in South Africa […] by driving generic substitution of medicines, wherever possible.” Because of the glacial pace of such proceedings, whether Bayer wins or loses it will succeed in keeping generic competitors out of a major market for the next four-odd years.

Comment: This brief account is really just scratching the surface of a highly complex and potentially far-reaching fight over how the pharmaceutical industry is allowed to charge for its lifesaving and highly lucrative products.

Clicks has issued a trading update for the six months through February, and not too much in the way of surprises. The business notes that HEPS will be +20 – 30% up for the period, assisted thither by a handsome R250m SASRIA payment in respect of losses sustained during last July’s bout of social unrest. Clicks claimed a total of R726m from SASRIA; thus far it has landed R467m of that. In other Clicks news, the business opened its 800th store last week, in Somerset Crossing in the Western Cape. The plan is to open between 25 and 30 new stores in South Africa every year, with a target of 900 by 2026. Some more of those numbers: the business currently operates in South Africa, Botswana, Lesotho, Namibia, and eSwatini, employs over 16,500 people, and runs 650 pharmacies and 195 Clicks clinics. Its loyalty programme reaches around 9.5 million people.

Comment: Clicks hit its stride under David Kneale but has maintained its soaring trajectory ever since. Truly a great South African business.

More on that trading update from Clicks for the 20 weeks through January 16, with sales for that oddly specific period +10.4% to R15.1bn. Of this, COVID vaccines accounted for R685m, raising retail sales by +6.9%. And this off a high base: last year’s second COVID wave saw higher sales of preventive healthcare products like supplements, immunity-building vitamins, masks and sanitisers, while for all the drama which attended its arrival, the milder Omicron variant wasn’t the same gift for retailers in this space. Speaking of which, both Clicks and Dis-Chem have grown same-store sales – by +11.1% in the case of the former – suggesting that they both continue to take market share from independent pharmacies and the smaller chains. But back to Clicks: its territorial ambitions remain unsatisfied, with an insatiable yearning to open as many as 30 stores a year, which should take it over the 800 mark in 2022. And as the chain grows, so too does its distribution arm: sales over at UPD were also up a pleasing +10.1%.

Comment: A great business, whose success may be attributed, inter alia, to a solid growth strategy and brilliant execution in store.

Big news for Clicks this week as the Supreme Court of Appeal upheld, with costs, an appeal against a decision of the Western Cape High Court that the retailer had contravened the Pharmacy Act by owning a drug-making facility, viz Unicorn Manufacturing. Ruling against Clicks last year in its battle with the Independent Community Pharmacy Association, a judge at the court averred that “an entity having interests in both types of pharmacies would gain financially if the manufacturing pharmacy’s products are promoted by the pharmacists in the community pharmacies over others.” This he said could prejudice consumers against receiving the best quality of product at the best prices, and in products not strictly needed being recommended and sold to the public. The Appeals Court found that the structure of the Clicks Group represented separate and different juristic persons with Unicorn firewalled away under the New Clicks subsidiary.

Comment: The separation of church and state, as it were, remains to us a sound guiding principal.

Powerful stuff from Clicks for the 12 months through August, with Group turnover growing +10.2% to R37.3bn, and operating profit up +8.2% to R3.0bn. The Group opened 39 net new Clicks stores last year, for a total haul of 782 stores, of which 80% have a pharmacy. Health and beauty continued pleasing, growing sales +8.3% to R26.3bn, which Clicks attributed to competitive pricing and differentiated ranges. Pharmacy grew +10.2% – relatively modest in the face of fewer seasonal flu and cold infections (thanks COVID) and now accounts for 29.5% of retail turnover. And the ClubCard – South Africa’s first and most iconic retail loyalty programme – now has 9.2 million members. Finally, the distribution business grew +12.3% to R17.4bn, again justifying the strategic acquisition of UPD how many years ago now? “The Group’s strength in our core health and beauty markets coupled with our proven capability to adapt to changing market conditions, to trade through difficult times and maintain volume growth, positions us to sustain financial performance,” says CEO-in-waiting Bertina Engelbrecht.

Comment: Excellent work from a business that has scarcely made a misstep since we’ve been publishing. For more detail have a look at our results <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/167763/211021_Clicks%20FY2021%20Results%20Summary_final.pdf" target="_blank">summary</a>.

Supporting the smaller supplier this week is Clicks, with the launch of its new SMME supplier listing portal. The business has a long-standing commitment to supporting smaller and black-owned enterprises, growing local hair care brands on shelf by over +743%, with a significant investment in black women-owned businesses since 2005. These brands include AfroBotanics, AfriBerry and Portia M, all of which have become established and achieved success. “We are committed to removing barriers and have worked hard to implement a SMME trading framework that will ease entry into the Clicks eco-system,” says Group Corporate Affairs Director Bertina Engelbrecht. The framework offers commercial and business support in the form of marketing, promotions, shared shelf space and business mentorship. The Group is targeting a solid spend of R4.5bn with black-owned SMMEs over the next three years.

Comment: One of the great and often unsung successes of our retailers has been their support for smaller businesses, both here and elsewhere in Africa. This is how we build an equitable economy.

The race is on between Clicks and Dis-Chem for market share in the baby category. Currently Clicks claims ownership of 19.6% share of this erm, growing market, and Dis-Chem, at 9.5%, is playing catch-up, with the acquisition of Baby City in January, and the addition of 33 baby specialist stores to the Dis-Chem Group’s store network. Undeterred, Clicks has fired back with the launch of its first Clicks Baby store in KZN’s Gateway mall in May. The concept store features breastfeeding and nappy changing spaces, click and collect online purchases, changing rooms for maternity wear, gift wrapping services, and on-floor advisors trained by brand experts – a great opportunity for brands to compete with the growing share of private label, that has cracked the milestone of 30% participation in Clicks front shop health and beauty by their most recent half year. Game had earlier stated their intention to claim back baby as an ownership category, but their latest strategy does not mention this, leaving Dis-Chem and Clicks to duke it out in the sandpit, building out their respective offerings to young families.

Comment: Truly contested space is hard to come by in South Africa’s consolidated retail environment. And here’s one where newcomer Dis-Chem appears to enjoy a structural advantage.

Clicks has offered to purchase in its entirety Pick n Pay’s retail pharmacy business, and should the transaction be approved by the competition authorities, will acquire the pharmacy licenses, the ethical drug stock, and the services of all staff currently employed in the pharmacies. The transaction includes Pick n Pay’s 25 in-store pharmacies, which will trade under the Clicks banner. The move will bring to 632 the number of pharmacies owned by Clicks, from 601 announced at its half-year results, putting it basically out of reach of all comers: currently 50% of South Africans now live with 6km of a Clicks pharmacy. Says Clicks CEO Vikesh Ramsunder, “The acquisition … accelerates our strategy of extending the convenience and accessibility of the Clicks pharmacy network.” What’s in it for Pick n Pay, aside from the obvious heaping pile of cash, whose value is as yet undisclosed? They haven’t been opening pharmacies hand over fist, and in offloading this asset will be able to focus further on the knitting, while letting existing punters down gently.

Comment: Of real interest to us here at Trade Intelligence is how these two mighty brands will trade together in the same space – the first time we’ve seen such a thing in we don’t know how many years.

So how has Clicks fared these past six months, you ask, and we are here to tell you. Group turnover up +7.6% to R18.1bn, with both retail and wholesale growing handily, and operating profit up a very liveable +9.7% to R1.4bn. Within the South African retail operation, health and beauty grew +7.2% and private label – a winner across the sector lately – +11.7%. “A key strategic focus area is the tiering of private label,” explains Mr Ramsunder. “We recently launched the Clicks Expert range as our top tier, and we will be rolling this out to more categories.” Pharmacy though, different story, up just +3%, which they’re blaming on fewer acute infections as everyone masked up and self-isolated, and generic medicine continued its inexorable cut-price rise. UPD was another big success as it always seems to be, growing a whacking +13.8% for the period. And Musica is well and truly on the way out. For a more detailed breakdown, click on our snappy one-page summary here.

Comment: UPD was a bold and pioneering move for Clicks back in the day. But a gift that’s kept on giving.

51% of South Africans (calm down, this one’s a good number) live within five kays of a Clicks store, and within six of a Clicks pharmacy. Here’s another: Clicks states one in four medicines sold in South Africa come from a Clicks pharmacy. And one final number: of the 757 Clickses out there, 600 are outfitted with pharmacies. This is testament to Clicks’ relentless drive to pharmacy rollout, and the appeal of the offering itself, which provides professional advice, low dispensing fees, and comprehensive ranges of generics and OTC medicines. The pharmacy business is supported by wholesale operation UPD, an inspired purchase back in 2003, by delivery outfit Clicks Direct Medicines, enabling penetration into far-flung regions, and by the integration of prescription services on the Clicks app. And more is to come: CAPEX of R700m this FY will focus on the store and pharmacy network, and on retail and distribution infrastructure.

Comment: Pharmacy at Clicks is driven by a great strategy, and well-executed by a talented team. Nice one.

If you’ve been following the Tatler these how many years – and really, no shame if you haven’t – you may recall that we’ve been vocal in expressing our belief that Clicks should have offloaded Musica the second the internet was invented, or alternatively attempted to turn it into some sort of pioneering homegrown bricks and clicks hybrid. Ah well. They’ve now reached the former conclusion themselves, apparently, and decided to close the business as of 31 May. “Musica has been operating in a declining market … owing to the structural shift globally to the digital consumption of music, movies and games from the traditional physical format,” explained Clicks. Elsewhere, the business is going great guns according to their trading update: Group turnover up +7.8%, retail health and beauty sales up +8.0%, and wholesale via UPD, which may soon be assisting in the rollout of COVID vaccines, up +10.6%. Online sales picked up +173% over the previous year, and elsewhere sales were sustained by the preponderance of footprint in convenience locations and small local shopping centres.

Comment: So long, Musica. Not without a tear, for what we still believe was the unnecessary demise of a great South African brand.

Some interesting developments on the leadership team over at Clicks, a business going from strength to strength even in these, ahem, “challenging times” (can we find a new descriptor please? Ed.). Bertina Engelbrecht, currently HR director, will also take over strategic stakeholder engagement in her new role as Group Corporate Affairs Director. UPD MD Vikash Singh has been promoted to Managing Executive of Clicks, bringing his financial and supply chain experience to the post. And Trevor McCoy comes in from Sanofi to take over at UPD, after 25 years in and around pharmaceuticals. And a milestone: Clicks has just opened its 750th store, in the Cape Quarter at Greenpoint. Cutting the ribbon at the new property, CEO Vikesh Ramsunder pointed to the ongoing growth of the business. “In 2016 we were at 500 stores,” he observed. “Over the past five years we have significantly grown our retail footprint, with 50% of the population in South Africa now within a 6km radius of a Clicks pharmacy.”

Comment: A great achievement from a business whose leadership team is starting to reflect more accurately the demographics of the Country it serves. Nice one!

In what would be a coup for the business and a great service to the people of Mzansi, Clicks is apparently in talks with the government to distribute the COVID-19 vaccine when it hits these shores. All of the current vaccines on offer require refrigeration; Clicks has, it says, the requisite cold-chain compliant distribution capacity to transport and store the vaccine via UPD, its pharmaceutical wholesale and distribution arm. Clicks also has a network of 585 pharmacies and 195 in-store clinics, each with the capacity to store and, in the case of the latter, presumably to administer the vaccines. It should be noted that Clicks is not alone in this initiative: Shoprite and Pick n Pay have also offered to assist in the distribution. Medirite, says Shoprite, already distribute the flu vaccine through its 144 outlets.

Comment: We’ve long had a vision of our world-class grocery retail and distribution network becoming a formal partner for government in initiatives which require reach and resources in the service of all South Africans.

Those Clicks results then, for which you’ve been waiting for with bated breath: Group turnover up +9.6% R34.4bn, with retail turnover climbing +7.3% to R24.8bn on the back of competitive pricing, the opening of new stores, growth in online sales and the ongoing loyalty of Clicks ClubCard users. Health and beauty, that attractive hedge in a recession, grew turnover by +8.4%, while front shop health absolutely kicked the lights out, growing +19.7%. The business opened a net 39 new retail stores for a total of 743 stores, with 40 net new pharmacies opening for a now unassailable 585. On the downside, though, pharmacy sales growth was muted at +3.2% in the absence of a flu season (thanks COVID) and a switch to generic medication. And worryingly for Clicks, market share actually fell in pharmacy, down a touch to 23.8% as people got their necessities via delivery from the local apteek. “These results have highlighted that we have adapted to the new market dynamics and that we’ve settled into new ways of working,” says CEO Vikesh Ramsunder. For more, read through our handy one-page results summary here .

Comment: A lot of numbers, most of them good. But Clicks will have to find an answer to the home delivery issue.

Meeting a very low bar, Clicks has had a marginally better week these past seven days. After the own goal of the TRESemmé ad, the druggist has bypassed the functionaries and the EFF, meeting with Small Business Development Minister Khumbudzo Ntshavheni to thrash out what proper contrition looks like. Turns out, it’s putting your money where your mouth is, by increasing spending on small, micro and medium enterprises (SMMEs), particularly those specialising in local hair and beauty care. Clicks’ preferential procurement spend currently stands at 50.2% and spending with local suppliers in 2019 came to R26.7bn. However, the Minister pointed out that this included established and not fully empowered companies and has committed her department to helping Clicks to build a more inclusive model by focusing on SMMEs owned by blacks, women, the youth and people with disabilities.

Comment: Good steps.

Very quick trading update from Clicks, more next week. The perennially defensive (in a good way) health and beauty business seems to be faring pretty well over the pandemic, with retail sales up +6.3% for the 23 weeks through 9 August, Group turnover up +10.2%, and online sales up “significantly”. UPD was as always a dependable performer, growing +11.4%. On the downside, social distancing and the wearing of masks have played merry hell with the spread of colds and flu, always a good source of over-the-counter revenue for the business, at this time of year, so our gain was, so to speak, their loss.

Comment: Still, one cannot have it all.

An interesting court battle concluded this week; interesting, that is, if you’re an independent pharmacy, not so interesting if you’re Clicks, who lost. At issue was Clicks’ ownership of Unicorn Pharmaceuticals, which imports and repackages drugs as Clicks generics. The Independent Community Pharmacy Association (ICPA) argued against Clicks’ ownership of the business before the Cape High Court on the grounds that pharmacies are forbidden from owning drug manufacturing concerns, thus disabling them from selling only their own product rather than that of suppliers. Clicks made the case that the arrangement has helped reduce supply chain costs, an argument it is now hoping will receive a more sympathetic hearing on appeal.

Comment: The survival of South Africa’s independent pharmacies has been in question ever since we started publishing this missive 15-odd years ago. This ruling represents a rare victory for the sector in a long war they appear to be losing.

Pretty thin news week on the retail front so we’re going to slip this in as if it’s not a COVID-19 story, which it semi-is. Anyways. Couple years back, Clicks started pioneering a queue management system called Virtual Queue for dispensary patients, allowing them to check in, maintain their place in line and receive notification via SMS when their turn arrived for service, taking some of the frustration out of the process for punters and, not coincidentally, allowing them to shop for cosmetics and small appliances in the gleaming aisles while they waited. Now of course, the system has taken on new significance. Scott Matthews, Head of Moving Tactics Retail Analytics, which supplies the tech: “In our current health emergency, it has been integral in enabling social distancing within their pharmacy areas, where there is the greatest need for social distancing.”

Comment: And no doubt, many of the innovations our current crisis has spawned will be repurposed for the opportunities and challenges that the new norm will bring.

Interim results out from Clicks last week, in some blessedly non-COVID news. Turnover was up +9.9% to R16.9bn for the six months through March, with headline earnings, a sound measure of profitability, up +13.1% to R851.2m. Store numbers were up by 17 to a pleasing haul of 721. Health and beauty sales were up +9.6%, while wholesale outfit UPD grew sales +12.3%, buoyed no doubt by Clicks’ continued advance into pharmacy – they added another 27 for the period, for a total of 572, bumping its market share of the retail pharmacy market up a touch to 24.6%. “Competitive pricing, differentiated product ranges, the Clicks ClubCard and new stores were the main drivers of growth,” said CEO Mr Ramsunder, quietly getting on with the business of business. Like other businesses before it, Clicks have said they’ll be holding onto the dividend until things settle a bit, and anticipate tougher trading conditions post-lockdown. For our snappy summary, click here.

Comment: What’s the limit for Clicks, stores-wise? They’ve got their eye on 900.

Another strong trading update, this one from Clicks, which saw turnover rise +9.9% to R12.9bn for the 20 weeks to 12 January. UPD, as has long been the case, was a particularly strong performer, with turnover up 13.1%, and total managed turnover – a combination of wholesale turnover and turnover managed for bulk distribution clients – growing +10.2%. Total retail sales grew +7.9%, or +4.7% on a like-store basis, and health and beauty sales, including Clicks, Claire’s, GNC and the Body Shop, grew +9%, or a comparable +5.4%. (CEO) Mr (Vikesh) Ramsunder? “Our wide range of gifting and value offering, supported by the convenience of the Clicks chain’s extensive retail and pharmacy footprint, ensured that we maintained our robust sales momentum of recent years and sustained volume growth.” Couldn’t have put it better ourselves. Oddly, though, the punters didn’t exactly do handsprings, with a -4% drop in the share price on the news.

Comment: Clicks’ long-demonstrated ability to coin it in an adverse market by flogging the little luxuries to stressed consumers remains untouched though.

Some snippets from Clicks this week. First up, the Department of Health has upped the single exit price (SEP) for 2020, increasing the amount manufacturers can charge for prescription meds by 4.53% – slightly lower than the allowable max, but higher than last year’s increase of 3.78%. This (it seems to us) will have a material impact on turnover but on little else for the business. Next up – after last week’s announcement that Clicks would be entering into a new loyalty partnership with Engen, Shell have announced their own new loyalty programme, giving punters 15 cents per litre back in rewards as opposed to the 10 cents they were getting through the Clicks programme. Finally – and this one’s probably the biggest story, Clicks has launched a new concept store in Fourways, with a larger beauty department, differentiated with distinctive fixtures, flooring and lighting, beauty advisors, extended ranges, and makeover stations with selfie mirrors that encourage customers to interact with product.

Comment: Excellent idea, particularly in difficult economic times, where the little indulgences take on greater importance.

A couple of weeks back, Clicks announced somewhat tersely that it would be ending its loyalty partnership with Shell, no real reasons given. Last week, they announced somewhat more fulsomely, that they had established a new partnership, with Engen, by which for every litre of petrol they purchase, members of Clicks’ ClubCard loyalty programme will receive one ClubCard point, or two during the introductory period in December and January. With SA’s largest network of service stations, Engen offers punters a greater number of locations to earn these points, a fact likely to mollify members whose noses were seriously out of joint when the Shell scheme was dropped. In other Clicks news, their licensed cosmetic brand Oh So Heavenly has been bought by Indian outfit Wipro Enterprises as part of the acquisition of parent company Canway, for an unspecified amount.

Comment: Exciting times for one of SA’s most consistently successful retail brands.

From when David Kneale took Clicks over in 2006 to when he retired at the beginning of this year, revenue trebled, the store base has doubled, operating profit grew six-fold and the market capitalisation of the business went from R3.2bn to over R50bn. And – not insignificantly – the Group created 6,000 new jobs. Against all of this, his most recent payout from the business was R106m all in, including his salary and pension for his final four months of R3.8m, a short-term incentive of R6.6m and a retirement long-service award of R1.7m, and a cool R87m from the vesting of long-term incentive appreciation units from earlier financial years. In other Clicks news, the business is ending its deal with Shell whereby punters would earn 10c in ClubCard points for every litre of Shell petroleum they put in their car.

Comment: No one’s saying why, but rest assured, members are not happy.

Those Clicks numbers then that they hinted at a couple weeks ago, but have now been revealed to a waiting world in all their glory. Just, wow: Group revenue up +7.7% to R33.37bn for the year, with gross profits up +8.5% at R6.7bn, and something they’re calling total profit up +16% at R1.7bn. And if you happened to have a couple of shares squirreled away under the mattress, good for you: the cash-flush business has declared a dividend of R1.2bn, having forked over R2.8bn in February to staff as its successful broad-based black economic empowerment share ownership scheme was vested. Some other numbers: 8.1 million, the number of members of the venerable but still successful ClubCard programme, which accounts for 78% of sales, and +10.5%, the amount by which retail health and beauty sales increased. 27%: the market share of pharma distributor UPD, up from 26% last year. And 300, the number of locations Clicks have identified for potential stores, which would bring the total to over 1,000. For more numbers and insights, visit our Results One Pager here.

Comment: A business that continues to deliver, to shoppers and shareholders alike, year after year.

A tidy trading update from Clicks, whose share price jumped to a record high on the news that Headline Earnings Per Share (HEPS), broadly considered a reliable indicator of profitability, would be up to the tune of between +15% and +18% for the financial year through August 2019. This, they say, is attributable to a solid performance by Clicks in the second half, by pharmaceutical distributor UPD racking up some new contracts, and by improvements in the management of working capital across the business. Clicks, you will recall, is trading out of around 680 stores, with 528 pharmacies, either standalone or in store, and as of February 2019 owns almost 24% of the retail pharmacy market, with an eye on the 30% mark. UPD, South Africa’s largest full-service pharmaceutical distributor, grew turnover by about +22% to R10.2bn for the period.

Comment: Note to the young retailer, just starting out in the business: just do what Clicks does and you’ll be OK.

More on that growth in private label, which so intrigued us when we reported on the Click results last week. No-name brands, as they used to be called, have played a significant role in the construction of the bulwark Clicks have built. Own brands now make up 29.7% of Clicks’ front shop offering, and 6.2% of pharmacy sales. Its famous three-for-two promo has also had a role to play, as has the unassailable might of its venerable ClubCard loyalty programme. But shed no tears for Dis-Chem; they’re doing OK. Rather than Clicks taking market share away from them, the two combined have been busily chipping away at the rest of the retailers, and punters are still apparently shopping between the two.

Comment: While we celebrate the ongoing success of Clicks, we enjoy the thrill of a strong contest between these titans of health and beauty.

Those Clicks interims, then, for which we’ve stopped the presses: Group turnover up +6.2% to R15.3bn in the six months through February, with operating profit up +11.3% to R1bn. Health and beauty was the chief contributor, category-wise, with sales up +8.5%, while the star performer of the Group was pharmaceutical distributor UPD, growing +21.9% to R10.2bn. Retail expenses were up +7.8%, it is true, as the business forked out for 33 new Clicks stores, 35 pharmacies and space extensions in 25 stores in the past year, but it’s also true that retail margin was up, as a result (their words) of “more customers switching to Clicks private label products and the positive mix impact from the stronger growth of front shop relative to pharmacy.” Clicks also increased its share of the retail pharmacy market from 23.0% to 23.8% for the period. For more on this, have a look at our summary here.

Comment: As neat a set of numbers as we’ve seen in a while. Nice work, that Clicky One.

In 2018, 7,800 Clicks employees received a total of R1.3bn in payouts under Clicks’ employee share ownership scheme (ESOP). This year, the second tranche of payments will see them pocket another R1.5bn as payment of the remaining 50% of shares in the scheme. They’ve also received a cool R39bn in dividends for the course of the scheme, as the Clicks share price (and don’t we wish we’d got into that with a little more vigour than we did) has risen +360% since the programme began in 2011. The scheme kicked off with 10% of the Group’s issued shares placed in the Employee Share Ownership Trust to be allocated to all full-time permanent employees, with senior black staff, longer serving employees and pharmacists getting higher allocation. 2,000 of the original shareholders have left the business, but remain beneficiaries.

Comment: Simple genius. A part of Clicks’ ongoing success must surely be attributed to the motivation of staff, who have a stake in the day-to-day operations of the business.

It’s a slow news week, so gather round and we’ll spin you a yarn about ladies’ razors which at time of going to press probably won’t even be available any more. In order to free up some space in their razor-dispensing shopfittings, no doubt, Clicks discounted seven variants of their Gillette Venus cartridge packs in a “Four for R142” offer. Clicks, of course meant four blades, which is the number you get in a pack; the punters, of course, thought that Clicks meant four packs, and this led to, shall we say, deep discounts of up to 88% a throw. Razor blades being made of the stuff from Avatar, or meteor steel or something, there was something of a run on the commodity as it were. Clicks to its credit decided they’d honour the letter of the ad rather than its spirit, and as a result, you could get razor blades for less than the price of a small family car, at least until five minutes ago.

Comment: Never mind Clicks. Cathay Pacific recently made the mistake of putting a whole bunch of first class tickets up at cattle-class prices, or a discount of a cool R200k. And they did it twice before they learned their lesson.

Fun fact: Clicks’ share price has climbed 2,500% since 2006, when David Kneale took over as CEO. Now on to more workaday matters: a trading update from Clicks reveals that sales grew +7.8% for the 20 weeks through mid-January, or +4.5% on a like-store basis. Admittedly, this is down from +13% last year, but still better than some of the other major retailers, all of whom have suffered in this very challenging ambit. Retail health and beauty sales rose +8.6%, driven thither by a successful promotion strategy centred around Clicks’ time-honoured ‘3 for 2’ offers according to new CEO Vikesh Ramsunder. Surprisingly, punters weren’t exactly clicking their heels over the numbers: while the share price jumped on the news, it subsequently retreated, to close -0.8% down on where it had started on the day.

Comment: A victim of its own success perhaps. The vagaries of the stock market aside, this remains an impressive performance under trying conditions from a very successful business.

Those Clicks results, then.  Turnover up +9.1% to R29.2bn, and gross profit +9.8% to R6.2bn, making you think that the lipstick index isn't just flim flam for the press release but hard socio-economic theory.  Certainly, when we're skint we feel an irrepressible urge to nip down to our local for a fistful of Revlon Super Lustrous and Fire & Ice.  Anyhoo: in the twilight of Mr Kneale, the business managed to open a record 41 stores and a net 37 pharmacies during the FY for a total of the latter of 510. And the venerable ClubCard increased active membership by over 800,000 to 7.8 million. And circling back to the numbers, like store sales were up +6.2%, with internal inflation of only 1.1%. Some sad news (cue wild unseemly applause) is that they're thinking of flogging Musica, presumably to a consortium of bearded millennials with an ironic taste for CDs. For a quick glance at the FY, have a read here.

Comment: A suitably high note (if you’ll permit us) for the departure of a quietly legendary CEO

2000% and some change. That’s the amount by which the Clicks share price has risen under the steady hand of David Kneale, who joined the business from Boots when the Tatler was just a gleam in our editor’s eye, 13 years ago. His achievements during this time have been legion, from the purchase of UPD and with it the move into pharmacy distribution, to rolling out in-store clinics and driving the full-service pharmacy agenda, to the purchase of pharmacies from Netcare not so long ago. And then of course just sticking to the knitting and executing on the strategy, getting supply chain and on-shelf right and responding to the wave of escalating demands from consumers for health and wellness products and solutions. All of which is just the lead up, of course, to the fact that having served out his contract, he’s retiring from the business, and handing over the reins to Vikesh Ramsunder, who has been with the business since 1993.

Comment: Played, sir. A truly remarkable innings.

A very happy 50th anniversary to an extremely sprightly Clicks, which celebrated the milestone by various acts of largesse, notably the R1m value donation of reusable sanitary pads to 16 schools around the country under the Girls on the Go programme. Clicks staff have identified 50 projects as needing help; another 34 projects will receives support through donations of toiletries, infrastructure and basic essentials. Another milestone for Clicks this year was its achievement of market capitalisation of R50bn, catapulting the Group into the JSE’s Top-40 index for the first time. And attendant on this, the growth of the share by 25% in the last 12 months. And that’s not all, sticking to multiples of five as seems appropriate: Clicks recently opened its 500th pharmacy, in the Park Station store. Clicks currently has 650 stores and is aiming for 900, each with a pharmacy, in the foreseeable future.

Comment: Excellent work from an icon of South African retail.

This story is not only tangentially about the Body Shop, in which we have a passing interest as it is a stalwart of the Clicks Group, but about Pargo, the e-courier start-up which has a network of pick-up points at stores all over the country for the delivery of online shopping orders, in a country with an unreliable postal service and no such thing as a safe and accessible front porch. Sorry, but a spade is indeed a spade. The The Body Shop (see what we did there?) deal will expand Pargo’s network to 1,500 locations which include large Clickses, SPARs, Freshstops and hundreds of independent retail stores. Clients include such online retailers as OneDayOnly, Spree and Bidorbuy. And in other Pargo news, the smart logistics outfit has just secured R15m in funding in a drive led by SAAD Investment Holdings.

Comment: Clever fellers, or what? Logistics for online retail is a challenge anywhere, but moreso here in the Beloved Country. South African ingenuity finds a way.

Sure there are other stories we could tell this week, about derring-do on the high seas of retail, or desperate, lonely acts of courage in the boardroom. Instead, there’s this: Clicks has set a new benchmark for corporate decency, by earmarking R31m in 2019 to provide health insurance to 9,200 employees earning less than R14,000 per month and thus adding to the only 8 million or so South Africans with this sort of coverage – a figure that has remained flat for several years. Mr Kneale? “We encourage other companies to show their commitment to improving access to quality healthcare for their employees by funding their healthcare benefits,” says the quiet man. “Collectively, corporate SA can play a meaningful role in reducing the pressure on the overburdened state healthcare system.”

Comment: Clicks have also pointed to the value of such initiatives in both productivity and staff retention, showing a commendable regard for the value of its human assets.

Continuing the theme of pleasing results from businesses headed by ex-pats, next up is Clicks, which released a by now customary set of crowd-pleasing interims last week. Let’s see, ah, yes: Turnover up +10% to R14.4bn, with retail health and beauty sales growing +14.3% and operating profit increasing +12.2% to R942m. Even more exciting, having set a target of 25-30 new stores for this financial, Mr Kneale has now upped the number to 40 and emphasised Clicks’ ambitious programme for growth, citing urbanisation as a driver. And where the big grocery retailers are struggling for retail space in existing malls, analysts point out that there are plenty without the cheerful blue signage and gleaming cosmetics aisles of your average Clicks. A challenge will be to grow turnover ahead of expenses with the rollout of new stores, something Mr Kneale believes the Group has well in hand. For more information, click on the Trade Intelligence 1-page summary here.

Comment: It’s too early to call David Kneale a legend of the industry. But the trajectory of Clicks on his watch has been legendary all right.

A nice big payday for Clicks workers participating in the employee share scheme via their Employee Share Ownership (Esop) Trust: the Trust has just flogged off half its holdings, which when they were issued back in 2011 were worth R44 apiece. They went for a significantly more impressive R166, for a total of 1.27billions of rands (South African). The scheme was launched to attract and retain scarce and critical skills, accelerate transformation, build employee commitment and enable employees to share in the growth and success of the business. Judging by the performance of the business, and looking at the makeup of the happy shareholders – 87% of the 6,814 participants are black, and 64% women – job done.

Comment: Excellent work there Clicks. A testament to a business which continues to do well by doing right, and a great model for other South African companies to follow in this new historical ambit.

We haven’t heard from Clicks for a while, get Mr Kneale on the blower, there’s a good chap. Hello? What? You don’t say! Turns out Clicks, like Shoprite, is getting along just tickety-boo, ta very much, according to the big boss, with Group turnover up +11.3% to R11.1bn and Clicks sales an even more impressive +14.2%. Volume growth in the stores was up +4.8%. UPD also put in a blistering showing, with turnover up +11.6%. Over to you Mr Kneale: “While we are not anticipating any easing of the financial pressure on consumers, we remain confident in our ability to trade through these challenging market conditions, as demonstrated by our recent performance,” says SA’s most understated CEO.

Comment: All of this you may recall, against GDP growth that’s not exactly all that. South African retailers like Clicks are pulling off a small miracle under these conditions, and showing other sectors how it can be done.

SA’s de facto biggest pharmacist is rolling out something called a “bespoke high impact multi-channel digital signage network” in order to build something known as” an innovative media platform” to educate and sell product to punters as they browse the shining aisles. Various screens will inform and engage with punters about promotions, supplier brand and seasonal campaigns, from the shop window to the till point. The solution is provided by Moving Tactics, who sound like someone you’d engage to guard your fuel depot in Helmand Province, but are apparently not that at all.

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Those Clicks results then, for which you’ve been clamouring like Halloween candy, you naughty scamps! Revenue up +10.9% to R28.34bn, profit after tax up +16.8% to R1.28bn. This is what we in the industry call “solid”, and attribute to the resilience of pharmacy and cosmetics even – perhaps particularly – in these troubled times and to the value of a large and nimble loyalty programme. Sales in the health and beauty brands were particularly strong, with The Body Shop, GNC and Claire’s up by +14.7%. Overall retail turnover was up +13.5%, while wholesaler UPD put in a respectable showing at +11.4% to R12.32 bn. And Mr Kneale revealed, with quiet pride, that Clicks was gaining market share even in the face of competitors like Dis-Chem – at the expense, it must be said, of the independents. Store numbers were up majorly this year, with the addition of 111 stores, including 80 secured through the outsourcing arrangement with Netcare, for a total of 622. 73 new pharmacies were added to existing stores.

Comment: Excellent work there, Clicks.

Pick n Pay is beating Woolworths, Clicks and Game, any number of cute cat/llama combos and your last Mauritian holiday on Facebook, reporting over 1.7 million likes in the last three months. Elsewhere, Woolies is beating all comers with 400,000 twitter followers, 250,000 Instagram followers and 9 million views on YouTube. This according to research by Ornico, anyway. Our research indicates that they’re all pretty much even when it comes to mentions in a certain influential weekly e-newsletter though.

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OK, we’re pretty sure that’s not what Gordon Gekko said when the highest success a New York sleaze ball could aspire to was a pair of red suspenders and an ample expense account. Ah, those were the days. But they are words Clicks appears to have taken to heart these how many years, and it’s paid off: they’ve just claimed back the loyalty crown from last year’s winner, Pick n Pay, in the 2017 Truth Loyalty Whitepaper, a contest that was named by an order of copywriting nuns who labour in silence in a salt cavern under a high Swiss glacier. Interestingly, loyalty overall is up 8% this year, taking the total number of respondents using loyalty programmes to 79%. Back to Clicks, then: the business reports that the ClubCard membership base has grown to 6.5 million members and these now make up 77.4% of sales – this after the old paper vouchers were replaced with virtual points redeemable as cash back at the till.

Comment: This does give lie somewhat to the idea that cash-strapped punters are more likely to shop around promiscuously for a deal.

Not the jewel in the Clicks crown, certainly, but a little sparkling gem, The Body Shop has always performed well for the Group, and lent a touch of je ne sais quoi to a solid operation. Now, it seems, The Body Shop might be on the way out, as internationally the brand has been acquired from L’Oréal by Natura Cosmeticos. Clicks has an agreement with The Body Shop until 2020 – one wonders how the deal will affect this. 

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With laudable inevitability, Clicks have launched their ClubCard App, because if a tree falls in a forest these days without an app to add seven different new angles to the falling experience, share it with the other guys in the grove, then send its data back to Trees Inc. to be sliced and diced and sold off to the folk at Roots Global, does it make a sound? Anyway, the ClubCard App is essentially your ClubCard on our phone, but here’s the genius part: you can also submit your prescriptions on the go and manage repeat medications from your phone – one more reason punters might consider making Clicks their pharmacy of choice.

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In order to keep you loitering suspiciously at the pharmacy counter, or perhaps to increase your impulse purchases of corn plasters and reflux meds, Clicks have introduced to 250 of their stores a snazzy digital signage network, with 150 more stores to be come by October. All well and good – it’s their cash, and goodness knows they’ve enough of it for a few flat screens. What’s interesting is this, from the business which is installing the network: “We have found that infomercial-style content that features information on pharmaceutical products, health-related facts, as well as health and lifestyle products and services, retain customers’ attention and result in higher dwell times of 49 seconds, with an average attention time of 21 seconds, resulting in a conversion rate of 91%.” 

Comment: Stranger than fiction? You decide. Although it would be interesting to know what exactly that conversion rate covers.

Characteristically robust interims from Clicks last week, with turnover up 8.5% to R13.1bn and operating profit up 14.7% higher to R840m. The Clicks chain itself recorded double-digit growth across pharmacy, front shop health and beauty, assisted thither by strong festive sales and improved price-competitiveness, a continued focus: 35% of sales during the period were promotional. Margins were also up at both Clicks and pharmacy-distributor UPD, for a group-wide figure of 6.4%. The really big news, however, is that the Group opened 89 stores in the six months to February, for a total of 600, and are now targeting 800 Clicks stores in South Africa. For those of you who missed our one pager update last week click here. 

Comment: Clicks’ growing footprint and domination of existing properties is likely to prove a significant barrier to newly-listed competitor Dis-Chem.

From Clicks, for those of you who missed our one page update last week, a cracker of a trading update: turnover up 8.6% to R10bn, for the 20 weeks to 15 January, with retail sales increasing 12.2% – or 8.5% in comparable stores – and internal inflation averaging 5.3%. Pharmaceutical distributor UPD also grew nicely, thanks very much, with sales up 6.4% against internal inflation of 4.3%. Mr Kneale modestly attributes the results on the punter’s propensity to buy lipstick and sunscreen even when she isn’t buying toasters, kettles or Hello magazines, and to shop enthusiastically for Click’s 3-for-2 promotions, which shielded the business from having to discount elsewhere during a tricky economic ambit. Sales were also helped along nicely by the opening of 15 new pharmacies, joined in December by 37 converted Medicrosses and soon to be swelled by front shops in 40 Netcare hospitals.

Comment: All of which puts the business in a strong position in pharmacy, rumblings from analysts about the threat from Dis-Chem notwithstanding.

And speaking of cheap petrol, which we’re pretty sure we were earlier, in our rambling distracted way, Clicks is offering, well, not cheap gas exactly, but the chance for Dr. and Mrs. J. Citizen to earn cashback points every time they swipe their Clicks ClubCard at participating Shell stations nationwide. Cashback is loaded onto their respective ClubCards six times a year and can be redeemed at any Clicks, GNC or Claire’s store. Clicks, log the gold standard in loyalty programmes, has upped its game again.

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A fine set of numbers from Clicks this week: turnover up 9.5% to R24.2billion, with headline earnings per share – something that seems to be reported these days rather than trading profit – increasing by 14.2%. This on the back of good individual performances across the Group: retail health and beauty sales – including Clicks, The Body Shop, GNC and Claire’s – increased by 13.5%, with Clicks adding 25 new stores for a total of 511, the ClubCard picking up a million new enthusiasts and – this perhaps the biggest achievement of all – the addition of 1,200 new jobs. Pharma distributor UPD grew turnover by a relatively modest 6.1% in a tough market. In the new financial year the Group plans to spend a record of R577million in CAPEX on 20 to 25 new stores and the supply chain and IT infrastructure to support the growth.

Comment: Solid stuff, the sort of performance which will be needed to keep the soon-to-be-listed and loaded Dis-Chem at bay.

It’s awards season, that breathless time of year when retail CEOs gather like so many startled fawns on the red carpet, fidgeting with their silk ties and wondering nervously who won what in the Times / Sowetan Shopper Survey. And while the full results have yet to be posted, we are able to report here that Clicks did rather well for itself, picking up first place in the glamorous Health, Beauty and Fragrance Outlets category.

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In a shrewd move which neatly answers some of the pressing challenges to online shopping in SA – theft, for example, a flailing postal service, and a shortage of delivery vehicles – Clicks is soon to launch a Click-and-Collect service in partnership with Pargo, which already operates parcel pick-up points at Freshstops, Waltonses and 7-Elevens nationwide. The way it works is like so: buy anything you like (within reason) off a site of your choice – Spree, bidorbuy and OneDayOnly, to name but three – then nip down to a Clicks of your choice, out of a possible 500 odd, sign the chit, and Bob’s your auntie. You’re now the proud owner of one of them gadgets which shrink unwanted cellulite using soundwaves, or something. What’s in it for Clicks? Footfall obviously, and one assumes a little cut of the take.

Comment: Win, win, win, innit?

Having led – by a matter of decades rather than years – in the area of shopper loyalty, Clicks was surprisingly tardy in taking its retail offering online. Now, however, after 18 months of intensive research, they’ve upped and opened an online store, with over 14,000 products available online. Being Clicks, they’ve supplemented this with a “health hub”, containing extensive info about vitamins and supplements and how they should be used, and medical conditions and medicines, all endorsed by both a doctor and a pharmacist, and regularly updated. While the retail offering is new, Clicks are hardly digital neophytes – they have over 500,000 friends on Facebook, and 92,500 followers on something called Twitter, which is apparently all the rage with the young folk.

Comment: Welcome aboard, Cap’n Kneale Sir. Proud to have you join us.

Medical staff union Hospersa was startled (and not a little displeased) to discover that hospital giant Netcare is to outsource 37 pharmacies in its Medicross clinics, and the retail outlets in 51 hospitals, to Clicks, which quite frankly came as something of a surprise to us, too. The deal, which becomes active on October 1, has also got under the skin of the Independent Community Pharmacy Association, which sees it as a threat to small business and a further example of creeping corporatization. Currently, as you know, Clicks has 384 in-store pharmacies, with a 19% share of the market, so this arrangement will give the Group a significant bump, although neither Netcare nor Clicks are expecting a material impact on their bottom lines just yet. Clicks will absorb all Medicross and Netcare-branded pharmacy staff, but Hospersa remain miffed at the lack, as they see it, of advance notice.

Comment: Whatever else the impact, Clicks branding in the foyer of every Netcare hospital in the Beloved Country, is going to send a powerful and positive positioning message.

Somehow, we’ve never managed to come up with a nickname for Clicks, which is remiss of us, and we apologise for that. But this does not alter in any way the fact that Clicks has earmarked R455million of the FY2017 budget for growth, planning to splash out on new stores, the expansion of existing stores and some of this information technology (IT) everybody is raving about. Next week, the 500th Clicks opens at the new Mall of Africa, and the plan is to grow inexorably at the rate of 20-25 a year until 600, and then, presumably, to keep going. The focus will remain on South Africa, says Mr Kneale, although he confesses that the stores in our neighbouring geographies are doing just fine, thank you very much. All this by way of fleshing out the interims: turnover up +13.4% to R12.1billion, and operating profit up +14.4% to R732m.

Comment: Never in his now-substantial tenureship have we had occasion to doubt the quiet brilliance with which Mr Kn. (The K is silent) runs the group.

On the well-worn carpet in front of the Competition Commission, where all retailers eventually end up is Clicks, dragged thither by the Independent Community Pharmacy Association of SA, which represents around 1,100 of the smaller outfits and alleges that Clicks is engaged in bullying tactics. For example, says the Association, Clicks has a deal with malls whereby if a Clicks decides to open a pharmacy in one, any small pharmacies in the same mall have 60 days to pack up their impahla and go. Also (and this is where it gets murky) Clicks makes money on the manufacture and promotion of its own branded medications, thus lowering its dispensing fees and undercutting the competition. Clicks points out that it does not manufacture its own pharmaceuticals, although it does sell them under the Clicks name. Some of the drugs in question, though, are made by Unicorn Pharmaceuticals, a business owned by Clicks, with the same board of directors.

Comment: One of these days, someone is going to have to do something definitive with the muddy legislation around anchor tenants and what constitutes fair competition in the burnished corridors of our malls.

We’re six weeks shy of interims, but what the heck. In the 20 weeks to mid-January, Clicks saw Group sales increase by a handsome 13.6%, with their cash-only business model unencumbered by bad debt from flailing consumers. Clicks’ comparable stores were solid at 10.6%, against internal inflation of just 3.4%. Interestingly, The Body Shop was the star performer for the period, with sales up 12.7%. UPD, the pharmacy distribution business, was not far behind, at 11%, continuing to benefit from growth in supply chain contracts. On the back of this, Group turnover was up 12.2% to R9.2billion. Mr Kneale attributes this performance during a difficult period to the success of Click’s product mix and promotions, particularly over the holiday trading season.

Comment: Excellent work, with the characteristic quiet confidence of the Group and its CEO.

Speaking of JVs which we will be shortly, Clicks has bought a 25% stake in the Sorbet business and have formed Sorbet Brands Pty Ltd, which will own all of the trademarks related to the Sorbet brand in these parts. Sorbet, as you are well aware is a nationwide chain of funky hair and beauty salons, which also offers a range of bath, body, waxing and nail care products through Clicks stores. Clicks now has an exclusive deal with Sorbet for the development and retail of these products.

Comment: A good deal for everyone concerned – for Sorbet, great distribution in a chain with a vastly superior footprint; for Clicks the credibility of a fresh young beauty brand which loyal punters won’t be able to get anywhere else.

Clicks is going to be forking out a record R432m in capex next year, opening 20-25 new stores and 25-35 new pharmacies and refurbishing 50 stores, even as rival Dis-Chem enters the listed pharmacy space, although the two phenomena are not necessarily related. In fact, says the ever-cool Mr Kneale, he believes there’s room for two major players in SA, like the Boots/Superdrug rivalry in the UK and the CVS/Walgreens bunfight in the US. Mr Kn. has good cause for this bullish generosity of spirit: Clicks grew turnover 15.3% to R22.1bn in the year through August and operating profit a solid 14.6% to R1.4bn. Clicks has been hedged against pressure on consumer spending by its wholesale business UPD, which grew 21.6% and accounts for nearly half of total turnover, while the core chain grew a still-respectable 10.9%, assisted thither by markdowns and specials.

Comment: Like many South African retailers, both Clicks and Dis-Chem put many of their international counterparts to shame (we’re looking at you, CVS and Walgreen) both in product offering and customer experience.

After identifying the need for a new IT Service Management (ITSM) tool to assist in better managing IT processes and services, the Clicks Group has turned to service provider Quintica and the BMC RemedyForce solution to help meet its goals. If IT is you game, you’ll know exactly what we’re on about here.

Comment:

Those Clicks interims then, my, how time does fly. Turnover up 14.1% for the six months through February, with diluted Headline Earnings Per Share (HEPS) up 12.8% (What’s that in operating profit? Ed). This on the back of furious promotional activity, which accounted for 29% of sales. Mr Kneale is expecting HEPS to stay there or thereabout for the year, with 15 new stores planned for the six months through August, which will be nice for revenue. And the plan past there, apparently, is to look with keener eyes towards the rest of Africa, planning more stores in Namibia and Botswana, and perhaps looking at East Africa as well – a departure for this famously circumspect retailer. 

Comment: And exciting news for punters. Grand days.

The venerable Clicks ClubCard programme is getting something less charitable journals have been calling a “facelift”. We would go so far as to call it a renaissance, without the Medicis and the flowing sleeves. What they’ve done, see, is to go paperless, loading new rewards points – with one point equalling ten cents on every rand spent – onto the member’s card itself, rather than sending them vouchers in the mail. Sadly, this means that the ClubCard magazine will only be available online, six times a year, for regular members, although Gold members will be able to pick up theirs in store. On the upside, Clicks will be crediting each and every ClubCard with the rewards which members were too slack or too busy to claim. The idea, for Clicks, is to simplify the use of the ClubCard for punters, while drawing their attention to the value of the points, which are reputedly worth double the average retailer offering. 

Comment: And of course to steal perhaps just a little thunder from Pick n Pay’s successful Smart Shopper programme.

…it’s probably a herbal nutritional supplement. Like US-based GNC, to which Clicks holds exclusive distribution rights and which has been ordered by the New York Attorney General to stop distributing certain lines through various stores (including GNC’s own) on the grounds that these products were “fraudulent and potentially dangerous.” According to one set of tests, only one in five GNC supplements contains the herbs listed on the label, most contain “fillers” such as rice powder, and some even contain potential allergens. GNC are naturally disputing the claims, and Clicks has elected to stand by their brand. In 1998, GNC was taken to court by some of its franchisees who accused the brand of heaping hidden costs on them and undercutting their prices in a buyback programme when the franchise stores become sufficiently profitable. 

Comment: Dietary supplements and dodgy business practices have a long and entertaining history together. Caveat emptor indeed, ahem.

It’s a slow news week, so like our colleagues in the business press we’ll pick a random period of say, 20 weeks, and report on the doings of one of our retailers during that period. In the case of Clicks, for the 20 weeks to January 18,  the doings were in fact significant: sales up 13.9% to R8.2billion, with Group turnover up 10.3%. Behind this performance, according to Mr Kneale, was a well-planned promotional strategy which saw sales burgeon even through the metaphorically chilly post-festive period. Breaking the numbers down, Clicks itself grew comparable sales 7.6%, The Body Shop – going particularly big on promos – grew them 9%, UPD soared at 21%, while Musica, for which we still have a very good idea, saw like store sales grow just one measly percent. 

Comment: An excellent performance, which will surely have seen Clicks gain some share off the competition – but whom?

Bit of a shakeup over at Clickety Clicks, not that we’re reading anything into it, mind you. Keith Warburton has stepped down as Chief Operating Officer of the Group effective March this year, after two years at the tiller. According to no less a personage than David Kneale, Mr W. has achieved all sorts of great stuff in the position – and these provide a reasonable snapshot of where the beloved retail brand is currently at: Repositioning the Clicks brand for growth by improving the value offering? Check. Expanding the stores and pharmacy footprint? Check. Improving the contribution of private label? Check. Growing the company’s customer loyalty and stemming the labour turnover in pharmacies? Check and check. Mr Warburton will be replaced by the very able Vikesh Ramsunder, current MD of pharmaceutical distributor UPD, where he has achieved similar greatness. 

Comment: Nice to keep it all in the family. Good luck with your next endeavours Mr Warburton.

More deserves to be said about the recent performance and plans of Clicks, under the able if restrained stewardship of Mr Kneale. Who has mentioned in recent weeks that he believes there is still plenty of space into which to expand in the Republic, rather than marching grimly into Africa like some or rushing flapping about like others. Although Africa is not totally off the books, with 17 stores in Lesotho, Swaziland, Botswana and Namibia, there are plans to open a max of only seven more, in Botswana and Nam. Some analysts think this restraint vis-á-vis the motherland is a mistake; others point to Clicks’ success in rolling out in the small dusty malls of the peri-urban areas. Then there’s the stellar growth in over-the-counter generics, the ongoing success of the ClubCard with its 4.7million members and counting, and Musica’s dubious status as last-man standing among the big CD shops. 

Comment: And that 9.2% increase in Group turnover. The measured tread might just get you over the line.

The analysts have not been an easy crowd to please this results season, nor to be honest have they had much reason to be. And then along comes the debonair Mr Kneale over at Clicks, singing, dancing, meeting their growth expectations and opening stores left right and centre. Operating profit up 10% to R1.2billion for the year through August, off sales which were up 9.4% to just north of R20billion. Speaking of store openings, they opened 22 last year, but kept like store sales up a respectable 6%. Having invested R337million on growth in the last FY, they have mentioned that they will be forking over another R370million in the next one, on new store openings in their relentless drive to 600, and the refurb of 45 existing shops, with a bit left over for IT, always an important buy in this modern age.

Comment: And those accusations that Clicks is safe and predictable? “We are selling health and beauty, that is supposed to be sexy,” says a slightly miffed Mr Kn.

This one’s a little tricky, so watch our lips: Shoprite (and Clicks, and presumably any other corporately-owned in-store pharmacy chain there may be kicking around) are battling to earn their daily rind selling prescription medications to the sick of South Africa. This is not just because of the single-exit-pricing legislation which forbids them from negotiating with their suppliers (which must sting a little), but also because the medical aid racket here is so consolidated, with 85% of MediRite’s sales, for e.g. being bankrolled by the big three: Discovery Health, Metropolitan and Medscheme, giving them a bit of swing when it comes to negotiating the dispensing fee they’re able to charge. Adding insult to injury, retailers are often left with the bill when claims are rejected. 

Comment: A consolidated industry, dominated by a few big players? Excessive buying power? We’re sure we've seen this movie before…

Rad? Is that what the young people are saying these days? Wicked? Fresh? Sick? Probably not. But whatever it is that they do say, they’ve said it loud and clear for Clicks who for the fifth year in a row, have scooped, or indeed scored the Coolest Specialist Health and Beauty Store in the annual Sunday Times Generation Next Awards. And subsidiary Musica, purveyor of not quite as many CDs as they would like, were voted Coolest Music Retailer. Mr Kneale, for his part, believes that Clicks’ brand promise of “feel good, pay less” is a positioning that appeals to the youth market. “This market wants value but also innovation and newness,” he says – qualities on which he believes his brand delivers in spades. On other Clicks news, rival Dis-Chem has been granted permission by the Advertising Standards Authority to continue calling itself "SA’s favourite pharmacy". It provided proof that the research on which the claim was based was “sound and balanced”.

Comment: And in yet other news, Clicks has mentioned that Musica’s top selling item over Christmas was a phonograph, or record player.

Let’s get cracking with the Clicks interims then: sales up a 9.6% to R9.3bn for the half year, which, the analysts report, confirms their suspicions of tough trading conditions all round, clever chaps that they are. And HEPS, which we are to believe are a company’s best indicator of profitability are up 10.3%. Operating profit was up a more modest 7.3%, while operating margin was down a touch to 6.1%. As usual, UPD was a good story, growing its share of the pharmaceutical distribution business from 25.7% to 26.3%. Clicks itself grew sales 8.2% with pharmacy up 13.1%.

Comment:

The first Clicks in-store pharmacy opened up ten years ago today, give or take, in Glengariff Street, Seapoint, so time for a greatest hits album, don’t you think, or a commemorative box-set of generic headache pills? Take it away, boys: since then, the group has added another 330 in-store pharmacies in over 440 of its stores. Pharmacy reeled in R2.9billion in 2013, and now accounts for a whacking 26% of the business. Clicks own 18% of the pharmacy market here and are aiming at 30% as corporate pharmacies grow their share to 50-60% of the market in line with international numbers. When Clicks opened in the then-groovy St Georges Mall location in 1968, it was originally conceived of as a drugstore. It was only in 2003, after lobbying, in which Clicks itself played a significant role, that legislation was passed, allowing corporate ownership of pharmacies and the dispensing of pharmaceuticals.

Comment: And the rest, as they say, is history.

Here’s a big deal: Clicks are launching the first South African stores of American health and wellness retailer General Nutrition Corporation (GNC) through an exclusive franchise agreement. Phase One will see the launch of GNC products in 50 Clicks stores nationally, while Phase Two will kick off with the opening of a standalone store in Cresta Shopping Centre, Gauteng, to be followed by three more by the end of the year. According to Mr Kneale, the launch plugs into the burgeoning consumer trends of self-medication and preventative, rather than curative medicine where possible. Globally, GNC has 8400 outlets, including a sizeable franchise footprint in 55 countries. This deal has elements of both the Bodyshop project and the Boots relationship, both of which have served Clicks well.

Comment: It also positions Clicks favourably vis-à-vis rival Dis-Chem’s extensive nutritional supplements offering.

Clicks has just released its trading update for the 21 weeks to the end of January and while not exactly a corker, it’s not without its pockets of general corkishness. Group sales were up 11.6% to R7.7 billion, with total retail sales coming in at 7.5%, helped thither by Clicks itself, which grew at an inflation-beating 8.4%. Pharmacy contributed nicely at 12.4% with front shop sales growing 5.7%. Once again, Musica somewhat let the side down with total sales declining by 1.9%. The big story – and you know what's coming – is UPD, the pharmaceutical wholesaler, which came blistering through at 19.5% on the back of continued growth in its distribution business. Look for some modest fireworks this year as Clicks spends R338million earmarked for automated systems, more growth at UPD, and added stores.

Comment: The drive to in-store pharmacies has proven to be a solid strategy during Mr Kneale’s unflappable tenure.

In their cryptic fashion, Clicks have informed us, via SENS, that a change in the Clicks Group capital structure as a result of certain transactions, detailed in a recent circular, met with the approbation of shareholders, and in the light of this, the board has resolved to withdraw from these transactions. What can this mean?

Comment:

Don’t ask us what on earth this means, but hot off the SENS ticker tape comes the news that the Clicks Group is considering the issuance of a perpetual preference share instrument of between R500m and R900m subject to market conditions and ordinary shareholder approvals in order to accelerate Clicks Group’s current share repurchase programme. Dust off those certificates, people.

Comment:

More results, this time from Clicks, who grew turnover 13.6% to R17.5bn for the year to August 31, with net income up a more modest 9% to R751.2m on sales which grew 8.6%.  Generic medicines have been a winner for Clicks, with sales up 16.1% and now accounting for over 40% of sales. Another dependable performer was the venerable yet still fresh ClubCard programme, which now has 4.1million members, accounting for 76% of sales and spending on average twice as much as non-members. CDs, hmm, less so, with sales up just 5.9% as online music sales grow at 7.8% annually and accessories, like portable speakers, the big winner there, while Body Shop continued fragrant, with sales up 11.3%. And UPD, sjoe! Sales increased 22.8%, and they now own 26.7% of the wholesale drug market.

Comment: As we have repeatedly mentioned, we have a great new business model for Musica we’d like to run by you. Give us a call anytime.

Clicks have issued one of those tersely worded SENS warnings in Courier New to the effect that a subsidiary of the Group are intent on buying something in the order of R50bar of the company’s shares in the next little while. What can this mean? Blowed if we know, but we’ll let you know when we do, if you get our drift.

Comment:

While the Clickety One’s interims were not all that, everyone seems to agree that their fundamentals are solid, based as they are in the recession-resistant corporate pharmacy/beauty model, of which they were an early adopter and where they have established an almost unassailable lead, owning 60% of the category, and steaming confidently towards 500 stores and maybe, according to the confident Mr Kneale, more than even that. He readily acknowledges that his customer base of middle-income punters is more than a little rattled right now, but this too shall pass. All of this is raking in foreign cash, which Clicks, having its North American investment instrument, is doing nothing to discourage.

Comment: Mr Kneale looks so good in a suit he could almost be in charge of Woolworths.

Taking a leaf from the Big Massmart Book of Underpromises this week is Clicks, who inform us they expect headline earnings for the full year to August, which seriously doesn’t seem to be just around the corner now does it but just you wait and see, to rise just 5-10%. This, they say, is because it’s tough out there, because selling price inflation is unlikely to help them along much and that cost pressure on their business will stay high as they continue to roll out pharmacies. For the six months to February, sales rose 11.4% to R8.5billion while something called net income rose 9.8% to R360million. If you happen to be a punter, however, you’ll still be getting your dividend, won’t you, and it’ll be up 10% to 48.5c per share.

Comment: A good thing that this minor hiccup has not halted the successful rollout of pharmacies.

Loyalty is quite the thing these days, with every one of the majors dipping their toes into that inviting water, even when they’re pretending that they aren’t. This, perversely, as punters become ever more profligate, buying this from Woolies and that from Checkers as the fancy takes them. So let’s revisit, for a moment, the place where it all started, inside an unassuming though successful chain of stores selling makeup and inexpensive white goods, circa 1996. Clicks now has over 4 million active ClubCard members, who account for 77% of total sales, with a basket size double that of non-members. And the business has grown substantially on the data they’ve harvested over the years: who the most loyal customers are, where they shop, how frequently, and what they buy.

Comment: Which would have been the way to do it.

Not sure if you’ll be able to make head or tail of this one, but Clicks have just launched something they’re calling a non-capital raising sponsored Level 1 American Depositary Receipt (ADR) Programme which will provide greater flexibility to shareholders and should increase the company’s visibility in the United States according to CFO Michael Fleming. And in the spirit of internationalism which is driving the move, Deutsche Bank has been appointed as the depositary bank for the Programme. In the last three and a half years, Clicks Group has grown its offshore shareholding from 12% to 60%, showing increased interest in the company by foreign fund managers. And their interest, while touching in and of itself, has been rewarded: Last week shares in Clicks rose 6.4% to R62.79, a seven-month record. 

Comment: And something of a relief, we gather, as Clicks was markedly absent from the retail-share recovery two weeks ago.

Clicks, which has long believed in the potential of its role as a primary care provider, has just signed a landmark deal with the Western Cape government to provide immunisation, baby wellness and family planning services in 32 Clicks pharmacies across the province. These services will be free on a Thursday afternoon for customers with no medical aid and whose children were born in state hospitals, while at other times nominal fees will apply. Clicks will be springing for the appointment of private nurses to run the show, while the provincial government will provide free vaccines (to the tune of R3,500 per child up to 18 months) and contraception for cash-strapped mums. Over the past two years, Clicks has forked over R5million of its own running immunisations, in part to demonstrate the efficacy of the programme to the government. 

Comment: Primary health care is a globally-proven way of driving footfall in pharmacies. Nice one, Clicks.

Not that we were asking, but here’s an 18-week trading update for Clicks, to the end of December. Group sales were up a solid if unexciting 11.7% to R5.97billion, in line with other retailers, although Clicks itself grew sales 8%. Within this, dispensary sales grew by 9% and front shop sales by 7.6%. The main growth came through its pharmaceutical distribution business, UPD, which upped the ante to the tune of 20.3%, although it carries lower margins than the retail businesses. Musica grew 1%, affected by the closure of seven stores, and no doubt looking nervously over its shoulder at the advent of iTunes, while the Bodyshop managed a fragrant yet wholesome 10.2%. According to Mr Kneale, punters waited until the last minute before commencing their holiday spending frenzy last year.

Comment: We still have a great idea for the turnaround of the Musica business, if anyone is interested.

And in other news of the ‘non’ variety, Clicks will not be considering another excursion to Australia, where its hopes and fortunes foundered sadly, like so many others before them, back in the year 4, when the division accounted for an expensive 20% of group revenue. Australia, you see, doesn’t permit corporate pharmacies, preferring its citizens to take what comfort they may from home-distilled goanna juice. But Africa’s still on the cards where opportunities present themselves, according to the inimitable Mr Kneale. In December, for eg, Clicks will open up its first store in Lesotho. While Clicks are fairly edgy about the legislative challenges of opening up pharmacies elsewhere, growth here at home surely has a ceiling with the likes of Dis-Chem and Shoprite muscling in on the corporate market, and they may yet take heart from healthcare businesses like Netcare and Aspen which have enjoyed success elsewhere.

Comment: Time, perhaps, to suit up and head out beyond the comfort zone.

Those Clicks results then – turnover up 9.2% to R15.4bn, with internal inflation running at 0.5% for the year, and turnover from retail operations up 8.2%. UPD, viz. the non-retail side of the bizniz, increased turnover 11.1%, with price inflation averaging 0.1%. And operating profit was up a somewhat muted 7.9% overshooting the R1billion mark for the first time in the company’s history. Clicks itself grew turnover 9.2% also, cashing in on increased sales of small luxury items like beauty products and vitamins with like-store sales up 5.9%. They opened 20 stores for an impressive total of 420, and put another 23 pharmacies in, bringing the number to 306. And do they intend to stop there? Of course they do not. In the FY we are pleased to call 14 they intend spending R356millions on new stores, new pharmacies and store revamps. And as a welcome aside, by closing 14 Musica stores they lifted operating profit by 36.3%, leading the unflappable Mr Kneale to use the term “phenomenal” for the first time this decade.

Comment: Solid stuff, showing once again that getting your CEO in from the UK is potentially quite a good idea.

In our experience, when a business wants to conceal something from you, they hide it in a SENS announcement. So it was this week, with Clicks banging on incomprehensibly about an agreement having been entered into for the purchase of a maximum of R100million worth of their own shares by a subsidiary, all in that unattractive Courier New 13 point type that is generally used for these sorts of things. They haven’t pulled the wool over our eyes, though. As an extremely canny punter of our circle puts it, tapping the side of his nose: “Oho, yes: this is merely the company buying back its own shares. Those shares repurchased will then be cancelled. It is essentially a way of returning capital to shareholders and reducing the number of shares in issue. The earnings per share going forward is increased and therefore at an unchanged PE multiple the per share price will rise to the extent required so that the overall market capitalisation is not affected.”

Comment: We couldn’t have put it better ourselves. So we didn’t.

There are some people in your life whom you kind of know, and you think they’re pretty cool and interesting and dynamic, but you never seem to spend any time with, and always assume that one day you will. That’s how we’re feeling about Mike Harvey right now, he of Clicks fame, who resigned as MD without warning or ceremony last week, leaving Mr Kneale holding the reins and saying things like “Mike and I agreed that the time is right for a change as the business moves forward to its next growth phase.” No more compelling reasons have been given for the move at this time. Harvey had been with the Group man and boy for 23 years, an executive director for six of those, and has played a major pre-and-post Kneale role in the sustained growth of the business.

Comment: 33.3% of all CEOs of listed retailers operating in the packaged consumer goods space have resigned in the past six months. A worrying trend.

And while we’re on the subject of Clicks, how’s this? The Unicorny One is launching a mobile voucher product which may be redeemed at Clicks pharmacies and in-store clinics. Impilo vouchers, launched with healthcare purchaser Health Connects and named for the Nguni word meaning “wellbeing” are aimed at the uninsured and at their employers. They are transferrable, and may be used to “send” healthcare to distant dependents. The vouchers may be bought for actual cash or for Ukash e-commerce vouchers which you can get at Pick n Pay and Shoprite, and negotiations are also underway with the Post Office. Currently, estimate Health Connects, R37billion is being spent out of pocket on healthcare.

Comment: A nice little market then, and a wonderfully appropriate idea for it.

A more modest six months for Clicks than those to which we have become accustomed since Mr Kneale took over: Group turnover up 6.8% to R7.7billion to February, with Clicks itself climbing 9.6% to R5.3billion, The Body Shop up 14.5% to R67.4million, and UPD just 5% to R2.9billion, despite the addition of 30 new Clicks stores and 29 new dispensaries. The reason for the muted results, as suggested by Mr Kn. himself, is the economic headwinds faced by the middle income South African consumer in Clicks’ target market. But not to worry, he says – Clicks has increased the number of special offers, with a resulting increase in both volume and market share in the health and beauty segments. This has obviously had its impact on the bottom line, with trading profit growing more slowly at 5.7% to R363million, or 79% of the Group total of R461million. Expansion continues apace, however, with Clicks on target to achieve its 500 stores by 2015.

Comment: So really, no worries there, just not the stellar stuff we have seen in recent years.

For a business with such a cheeky and cheerful presence in the malls, Clicks have been off the radar for some time now. So we thought a little catch up might be in order. For starters, since we were on the subject of loyalty programmes, ClubCard members now total 3.4 million, generating more than three quarters of sales at Clicks and buying twice as much as non-members every trip. Then there’s pharmacy, which Clicks pioneered and which every other retailer has followed with varying degrees (Shoprite; Woolworths) of success. Clicks now own 13% share of the pharmacy market, and are looking to get that up to 30%. And they want similar growth from private label, which contributed 18.2% to turnover last year, and which they are wanting to up to 25%. And if you’re a punter, Clicks has provided you with a handsome 30.4% compound annual growth rate on distributions paid out over the past five years, lucky you.

Comment: A tidy business that has done well by sticking to the proverbial, and a nice little earner for shareholders.

Loyalty-programme pioneers Clicks will add funeral cover to the services already available to its ClubCard members, many of whom have been with the programme since the year dot, when it started. While Clicks is not hell-bent on being a financial services provider, it is eager to keep its loyal punters away from the competition, and funeral cover is apparently the way to do it.

Comment:

Muscling in on the Shoprite / Massmart action, Clicks have also issued a trading update, this time an 18-week one. Turnover for Clicks itself up 8.1%, or 4.2% on a like-store basis at a tough time, particularly in prescription medications which were in deflationary mode for the period, assisted in their decline no doubt by the government’s single-exit-pricing policy which we have been banging on about since we chipped the first Tatler out of a slab of solid granite in the year dot. Sales for Musica – yawn – were down 5.2%, while the Body Shop, home of surprisingly affordable indulgence and welcome xmas goodies grew sales 10.1%. And UPD was up 3.6%, doing nicely out of generics. Sales for the group then – wait for it, wait for it – up 4.9% to R5.3billion.

Comment: A solid business, but tough times. It’s all there in the numbers.

Clicks workers are out under the banner of a still strident SACCAWU, which is demanding on their behalf another R42 in addition to the average of R350-odd on the table. The offer from Clicks represents a 9.5% increase on last year, well ahead of inflation, but, say the men in the Maoist caps, still less than the company can afford. The current impasse, if that’s the word, comes after five months of negotiations. The bargaining unit involved in the spat consists of over 3,000 workers, of whom around two thirds are SACCAWU members. Clicks is digging in on its offer in the light of current trading conditions and the impact of the recession – whether the last one or the next they do not specify – on the South African consumer.

Comment: And there we were thinking that the deal struck between PnP and SACCAWU last week marked some kind of breaking dawn.

Sales at the actual Clicks division of the Clicks Group were up 13% to R9,79bn for the year to August. Of this, price increases contributed only 1%, with volume increases of anyone? 12% accounting for the balance. Like store sales were up 7.5% by volume and 8.5% in value. The rest of the business, not so good. Musica, for whom we have an unbelievable business model if they’re interested, saw pre-tax profit decline 40% to R31,4m, Body Shop grew profit just 4% to R20,6m while UPD’s pre-tax profit slid 20% to R130m, and this is unlikely to improve much with 2012’s freeze on medicine prices. But Clicks, ah, Clicks, now. 32 new pharmacies for a total of 283, and store numbers which grew by 31 to 400.

Comment: They may be a one trick pony right now. But it’s a hell of a good trick.

Clicks’s’s retail turnover increased by 10.9% to R10.8billion for the year which ended, in a manner of speaking, in August 2011, while its margin improved to 6.6%, resulting in a 13.9% increase in operating profit for the period. This despite the fact that it was coming off the high base (in so many ways) that was 2010, and the other fact that selling price inflation was only 1.6% for the period compared with 2010’s 5.4%. How did they manage these numbers, you ask? Clicks itself, as usual, which posted real sales growth of 12.0% and continued to grow its share of the pharmacy market, with 31 new stores added for a total of 400, and 32 new in-store pharmacies, for a total of 283, operating margin up from 6.9% to 7.7%, and operating profit up by 25.8%.

Comment: No surprises then, and we promise no comments about the general stickiness of knitting, either.

Clicks has just opened its 400th store, and is aiming to hit 500 in the next 3 to 5 years, with somewhere slightly south of 30 being planned for 2012 alone. Of the existing 400, 283 have in-store pharmacies, making Clicks SA’s biggest pharmacy retailer by a long chalk, and 103 of those have walk-in clinics for primary healthcare. Pharmacy is a tricky game in which to earn a crust, but Clicks appears to see it as a lynchpin of its venerable and overarching strategy to achieve customer loyalty. As we speak, Clicks, who pioneered loyalty in South Africa before the Scouts did, has 3.4million ClubCard members, who received a not insubstantial R220million in cash back rewards in the past year.

Comment: So there you have it. Not bad for a spry and chipper 43 year old. That’s Clicks, obviously. Not anyone associated with the business. Although with 6,500 staff, they must have one or two who are 43.

Clicks may shortly be in a position to offload non-core asset Musica, which as a purveyor of music on small plastic discs in this age of Facetube and streaming online digital mpegs occupies the position of a mechanical pianoforte in the age of the gramophone. Who might relieve Clicks of the Musicoleum? A consortium led by Ken Modise, ex of the now defunct MFP, with discussions now reportedly “at a sensitive stage”.

Comment:

Clicks is going into Botswana, and not in the upmarket-safari, let’s-go-to-the-Okavango sort of way. Nought bru. They have just opened the first Clicks in-country, in Gaborone’s Game City. At first glance, it does not appear to be putting a pharmacy in-store, although it will offer the time-honoured mix of home, health and beauty, as well as the ClubCard programme, and the recently launched Babyclub.

Comment:

Guess how much Clicks made selling medicine out of its 260 in-store pharmacies last year. Bwaaaanhp!! Wrong! It was in fact zero. Zip. Nada. But is Mr Kneale worried? He is not. Pharmacy, you see, is all part of Clicks’ cunning plan to get punters into the shops where, the thinking goes, they will spend lavishly on hairbands, hand cream and toasters, categories where it is much, much easier to make a buck or indeed an honest British pound. A good measure of the success of pharmacies in driving footfall is return on equity – from 17.7% in 2006 before the strategy proper kicked in to 55.8% today. Pharmacy helps Clicks differentiate itself from the big supers whose personal care departments are its natural competitor; buying power is how it differentiates itself from the rest of the embattled pharmacy sector. It is able to mark up medicines by 17% compared with the maximum permissible 30% that most of the little guys need to survive.

Comment: A hugely successful, flexible and responsive model.

That poor bloody infantryman in any retailer’s army, Private Label, has been doing sterling service for Clicks of late, achieving 20% of sales and well on its way to a target of 25%. Clicks’ housebrands include “Clicks Essentials” ranges in beauty, hair, skincare, healthcare and home, while the vast number of brands over which it has exclusive licence on these shores include Max Factor and Boots No 7 in cosmetics, Weetol in supplements, Oh So Heavenly in skincare, King of Shaves in gentleman’s razors and Safeway in small white goods. A big success at the moment as Clicks cements its position as SA’s biggest pharmacist is front of shop, where private label sales have already hit 25.9% and are gunning for 30%.

Comment: For all sorts of other valuable Clicks info, you should check out our Trade Profiles <a href="http://www.tradeintelligence.co.za">here</a>.

Clicks has had a scorcher of an HFY, with Group turnover up 13.5% (and the Clicks brand up 15.8%) and operating profit screaming heavenward at a rate of 23.5%, due in no small measure to rocketing sales of private label, aggressive promotions and the continued rollout of pharmacies, which drive footfall and are currently sitting at 266, although somewhat threatened by a shortage of trained chemists and white coats to dress them in. Also on the downside is the dirgey performance of Musica (sales down 2.5%, profit down 9.4%) and deflation at The Body Shop, which saw revenue fall 10%. The phlegmatic Mr Kneale says that a tough six months is in the offing.

Comment: Although the resurgent Clicks should be equal to its challenges.

Clicks is extending its legendary loyalty offering to expectant mothers and new parents through an adorably lower-case initiative called babyclub, which will give them savings on an extensive range of baby products, automatic entries into appropriate competitions, notifications of events nationwide, and eventually, an all-expenses-paid education at Harvard.

Comment:

Michael Fleming, who replaced Keith Warburton as Chief Financial Officer down at The Clicks Group in March, is to take his rightful place as Executive Financial Director on that august company’s board with effect from 31 March inst. (an archaic expression meaning “in the current year”). A youthful appointment; he can’t be much more than forty … forty five … forty … thereabout …

Comment:

There may or may not be any truth in the rumour that Clicks might or might not be readying itself for a takeover by UK pharmacy chain Boots Alliance, where CEO Mr Kneale enjoyed a happy three decades before coming over here to apply some of his learnings to Clicks, which he has led from the doldrums to a brighter tomorrow – sales up a phenomenal 16.8% the last 18 weeks of 2010 off a high base, with comparable store sales up 13.6%, and Clicks itself contributing a more than satisfactory 12.7% to the mix. Gimlet-eyed analysts have observed that Clicks has cleaned itself up nicely in recent months, sharpening its focus on pharmacy and generally looking like a business readying itself for a transaction. Its market cap sits today at an appealing R10billion, while its share price has achieved sparkling new highs.

Comment: To be fair, as Mr K points out, Boots still has some private-equity debts to settle, and is focusing on its core markets of Europe, Asia and, erm South America...

How the heck do you sell CDs in these days of iPods, instant downloads and Somali-scale music piracy? This appears to be the question Clicks is asking itself – in the year to August, Musica grew turnover a negligible 0.5%, compared with Clicks (16.7%) and UPD (5.2%). Now Mr Kneale reckons that the business is a good generator of the ready stuff, with sizeable market share, which is exactly what we would say if we were looking to flog it, which is what Clicks will do if the appropriately flush buyer were to manifest itself, CD sales not being core to the group’s burgeoning positioning in retail pharmacy. (make sentence shorter – Ed) Overall, Clicks is a currently phenomenal business which has managed to grow operating margin from 5.8% to 6.2% in a difficult time – which calls further into question the role of an underperforming, non-pharmacy asset in the mix.

Comment: Clicks has never been afraid of disposing of non-core assets. But things will get really interesting when they start making a few more core acquisitions...

The Sunday Times loves nothing better than to tot things up and then publish supplements jam-packed full of the results. The Top Ten Teapots Survey. The Best Hair in Advertising Report. And, of course, the Top Companies Survey, in which it reveals, in all its naked glory, and neatly ordered, the growth you could expect had you invested in this business or that. Our retailers do surprising well, with all of the big boys represented, as follows:

Shoprite (3); Clicks (5); Spar (18); Massmart (24); Woolworths (37) and Pick n Pay (94).

Had you decided to invest in manufacturing businesses, however, you would have had to do a little more homework. Of the hundreds of businesses available in FMCG, only 8 made the grade:

Illovo (31); Aspen (33); Oceana (38); Rainbow(64); Tongaat-Hulett (74); Astral Foods (76); Tiger Brands (77); SABMiller (81)

Comment: Salient here is that of the suppliers who made the grade, two are from the volatile sugar industry (although one of the two also does golf estates), and two from the embattled poultry sector.

Nice work, Mr Kneale. Sales up 9.1% to R13.9billion, profit for the year up 19.3% to R564million for the year to June. This pleasing result, coming as it did at a time when the retailers are nervously pacing the marbled foyers of their emporia and checking their pocket watches against the arrival of the first of the festive shoppers in what is widely predicted to be a slow season, was due in part to the perennially miraculous resilience of lipstick and nylons during times of global crisis. Clicks also announced that it would be embarking one of those traditional South African share schemes whereby employees, some of whom are previously disadvantaged, receive 10% of the Group’s shares.

Comment: So there you go. It can be done, with lipstick and a stiff upper lip. But not, of course, at the same time.

Clicks will shortly be availing itself of the services as CFO of Michael Fleming, who currently occupies the same slot at Tiger Brands. Clicks are stoked with the hire, as Mr Fleming brings to the business an advanced knowledge of the supply chain, of building brands and of FMCG in general, rather than simply net cash flows and income statements. They are also – somewhat obscurely – excited by the impact Mr Fleming will have on their private label brands, which they are hoping to bring up to 25% of the mix from their current 18%, and closer to the ideal represented by Boots, who have 40% private label. Clicks’ CEO David Kneale also holds up Woolworths as a paragon of private label, where the house brand signifies quality to the consumer.

Comment: There are murmurings about a shake-up down at Clicks, of which this appointment might be an early tremor.

Those clever chaps down at Clicks have had a cracker of the year, with an expected increase of 25-30% in earnings per share for the year to August, driven thence by the defensive strength of its health and beauty lines and its Normandy-style assault on in-store pharmacies. Turnover, you may recall, was up 15.2% to R4.8 jolly old billions for the six months to Feb. While the rollout of in-store pharmacies has been a keen contributor to turnover, and has proceeded more swiftly than expected, you ain’t, apparently, seen nuthin’ yet. Clicks will be opening even more in-store pharmacies and talking the joys of affordable personal care and small white goods to the rural areas in its attempt to grow store numbers 40% in the next few years.

Comment: That Mr Kneale is a right ‘un and no mistake.

Clicks has announced the appointment of one Vikesh Ramsunder as Managing Director of UPD, the Group’s pharmaceutical wholesaler. Mr Ramsunder comes from within the Group, where he currently serves as head of logistics for Clicks, and replaces Linda van Niekerk, who has headed up the operation since 2005 and will be retained in a consulting capacity. Among Ramsunder’s achievements are the implementation of the Blueprint programme which focused on enhancing operating efficiencies within Clicks stores, and general improvements in the performance of the Group’s DCs.

Comment: A significant appointment at a time when competition in the pharmacy space is stiffening, on both the retail and the distribution fronts.

In more Clicks news, they’ve just reached the happy milestone of 250 instore pharmacies, which makes them the biggest pharmacy retailer in the country, with pharmaceutical turnover at R1.5billion last year. Distribution arm UPD is also the largest of its kind on these shores, growing turnover 14.9% last year and increasing market share. No time to relax, though: Shoprite is in the unusual position of snapping at Clicks’ heels, with 104 MEDI-Rite pharmacies in selected stores, dispensing 1.9million prescriptions in the year ended June 2010, and growing sales 60%. Pick n Pay with 18 stores and plans for 40, and SPAR who have just rolled out their pilot store at Shelly Beach, have also thrown their hats into the ring, although Woolworths has judiciously removed it with the closure of their three experimental outlets.

Comment: A hotly contested space, where the numbers are not huge but which certainly seems to bring the punters into the shop.

Let’s face it, it’s not for everyone, but if you happen to know your way around enterprise resource planning software, SAP’s the man for you, having been rated the Best Employer in SA for 2010/11 by the CRF institute, who also found that professional services firm Accenture came in at number 2. Keeping the Consumer Goods Industry flag flying in the overall category were Coke (at 4) and BAT (at 10), while Unilever and Clicks came through for us at 5 and 8 respectively in the large-sized employers category. The key to getting in there? Great HR apparently.

Comment: And who among us doesn’t like getting the back of their hand stroked gently every now and then?

...want jy’s benoem as die Coolest Specialist Health and Beauty Store in die Sunday Times Generation Next. The survey polls kids aged 13-22, and Clicks won the inaugural award in this category. Clicks are “stoked” as those crazy youngsters say, as people in this age bracket are “household influencers” as those crazy research folk say.

Comment: Rad. Or sick. Or something.

Clicks has given its carbon footprint the old once over, and found it wanting. Or excessive, rather and thus ripe for a trim. Two years ago, they appointed Carbon and Energy Management specialists GCX to run an audit on Head Office and one of the DCs, and found that Head Office could save 30% of its total energy consumption by putting in motion-sensitive lighting systems, and that 24.1% could be saved at the DC through various lighting retrofits, which together with various IT, aircon and water-heating improvements would contribute to a total saving of 27.6% – which could definitely make a dent in the effect of the Eskom tariff increase. In other Clicks news, they’re offering free HIV counselling and testing in each one of its 245 stores with a dispensary, and at 130 selected Link pharmacies nationwide.

Comment: When it comes to planet-friendly technologies, a commercial tipping point seems to have been reached.

Despite the government’s decade-long heel-dragging in finalising the dispensing fees discussion, Clicks has absolutely killed it in pharmacy, growing dispensary sales by 38% in the six months to February, and planning on opening 30-40 dispensaries a year, budgeting R250-R275millions for the job. The idea is to have a clinic and dispensary in each of the 500 stores it is their medium-term goal to have up and running – they’re currently sitting on a total of just over 340. In other Clicks news the group is contemplating a broad-based employee share scheme to help them retain specialist skills and get those BEE numbers up.

Comment: Call us curmudgeonly, but broad-based share schemes tend to be a way of giving away a lot of shares to people who may have a stake in how the company performs, but for one reason or another don’t pitch up to AGM’s.

Hands-down winner in both the Clicks and Pick n Pay results released last week was private label, which grew 15% at Pick n Pay (including, admittedly, their fresh section) and unspecified but substantial growth at Clicks, where it now makes up 19.2% of group sales. Clicks are targeting an eventual 20 to 25% of sales from private label, which includes such brands currently as Boots No 7, Natural Active and Weetol. No-name all over the show has benefited from punters buying down in the recession and retailers investing in quality in an area where handsome margin is to be made.

Comment: A global trend. In an increasingly fragmented market of national brands, loyalty is harder and harder to come by. Enter the man in the suspiciously plain shirt...

Sales over at The Clicks Group grew 9.3% to R6.9billions for the year ending February, with pre-tax profit climbing 18% to R376millions, and operating profit margins up 0.1% to 6%. According to Mr Kneale, the reason for this is simple – more lipstick, less dresses, with Clicks specialising in the former rather than the latter. This view is borne out by the minimal increase in Musica’s turnover, which grew by only 0.5% – to be expected for a retailer dealing in discretionary items during a recession. Another boost was of course pharmacy – Clicks are in sight of their goal of 300 in-store pharmacies, with 254 open at time of going to press, and 30% of Group turnover coming from pharmacy wholesaler UPD, which supplies independent pharmacies operating under the Link brand, also owned by Clicks.

Comment: A quiet cracker of a performance from a business with a simple strategy, impeccably executed.

Punters who have enjoyed a little flutter on retail shares will be clicking their heels and whistling jaunty tunes on the news that their investments have outperformed the index impressively over the past six months. The All Share Index has been trundling along turgidly at 10%, while Woolies shares have shot up 37% since September, and Massmart have gone up by 24%. Clicks, you will be intrigued to know, have positively screeched ahead at 50%. Foreign buyers have been responsible for at least some of the demand, which has also been buoyed by the cautious return to a more supportive shall we say economic environment. On the downside, Pick n Pay has not matched the shares of its competitors, dragged back perhaps by the perception that it is losing market share to retailers which are perceived as cheaper, and by some uncertainty over the future of its Franklin’s operation in Aus.

Comment: But nice that our sector, a yardstick of consumer and business sentiment, is ticking along so handsomely.

Online shopping in South Africa, she’s not so big. Last year, etailers, as they are catchily known, raked in a mere R1.6billion, or just 1% of all available wonga. Why should this be? Clicks believe it’s all down to the heinous cost of broadband in this country and the relatively limited base of wired consumers, while Massmart believe the market simply doesn’t want online shopping to the same extent that more developed markets do. In China, for example, online now represent 1.9% of all retail sales while in the US it spiked to 4% over the festive season last year. Arthur Goldstuck, SA’s very own web guru (and you know he’s a guru because his shirts never have collars) believes that it’s mainly a case of retailers not knowing what to do online, and making their sites frustrating to use.

Comment: Stokvels. Now <em>there’s</em> a channel.

Clicks increased sales 10% to R4.7 billion for the crucial 18 weeks to January, thank you very much, and has suggested that it may spend a bit of the extra wedge on some new stores. CEO Mr Kneale believes the group is good for another 150 stores at the rate of 20 or 30 a year, for an eventual total of 500-odd, or what we gambling men call a monkey. He also believes that the government should consult with pharmacies on the rollout of National Health Insurance, that pharmacists should be allowed to prescribe and dispense a greater variety of medicines, and that chains like Clicks, which plans to have a dispensary in each and every one of its stores, offer value of which independent pharmacies are incapable. Clicks currently has 220 in-store pharmacies.

Comment: Independent retail is what makes our industry so vibrant and exciting, surely. We’re just saying.

Shoprite has announced the acquisition of one of SA’s largest pharmaceutical wholesalers, Transfarm, in a move which will help it grow the already burgeoning MEDI-Rite arm of the business. MEDI-Rite currently has over 100 stores, and the plan is to open another 80 – 100 more in the next twelve months. The purchase of Transfarm, which turns over up to R200 million per month, will bring the benefits of centralised purchasing – like better availability and lower prices – to the Big Red One, according to Mr James W. Basson, CEO. It will also, no doubt, put the wind up competitors like Dis-Chem and Clicks, who purchased their own wholesaler, UPD, back in ’03. MEDI-Rite is now the second biggest pharmacy group in SA.

Comment: Aggressive stuff in a sector which is rapidly becoming as consolidated as the grocery sector, to the undoubted detriment of the little guy.

New Clicks has claimed top spot for the second year running in the CRF Leading Managers ranking, CRF being a research-based publishing outfit which knows a thing or two about this sort of thing. One of the brass on the selection panel mentioned that steely self-discipline and the ability to trust oneself in times of crisis are just the ticket in an effective CEO, and these are the sort of qualities Mr Kneale, who shared the accolade with his senior management team, has in spades. The Kneale Method, summarised in handy bullets below, is worth a squizz for the budding leader of men: • Have a clear goal and pursue it relentlessly • Get the basics right and be disciplined • Be in tune with your customers and staff • Recruit the right people for the right roles • Invest in employee development • Have a rewards strategy • Pursue a philosophy that integrates all the elements that attract, motivate and retain the people required to achieve the desired business results

Comment: Sound stuff from a business that all the analysts are making appreciative harrumphing sounds about right now.

Clicks last week posted a very natty set of results, outstripping all expectations, even their own, with group turnover up 8.8% to R12.2 billion, retail turnover up 15.4% and turnover at Clicks stores up 17.7%. Profit rose 16% to R472 million, with operating margin up 0.5% to 5.8%. Mr Kneale attributes this success to the resilience of the drugstore model under tough conditions, while certain admiring analysts have remarked on the general defensiveness of the Clicks position and the new efficiency with which the operation is being run. In the next while, Clicks intends spending some of this lucre on new stores (20-30) and new pharmacies to existing stores (30-40), with capex of R225 million planned for the new financial year.

Comment: And in a nod to the old carbon footprint, the results presentation was broadcast on Summit, something larger retailers would do well to emulate.

Plucky outsider KFC won the Grand Prix in this year’s Sunday Times Top Retail Brands Survey, would you believe it, with Edgars next and Shoprite blustering home in third, and Clicks in fifth, after non-retailer Spur, narrowly pipping Pick n Pay in sixth. In the Overall Grocery Shopping experience, however, it was Pick n Pay in pole, with Shoprite, Checkers, Woolies, Spar and Game screaming up the straight in that order. Game (first), Makro (third) and DionWired (fifth) delivered the goods for Massmart in the Electronics category, while Woolies Food Stops came in at a creditable third in the forecourts division.

Comment: Oddly enough, Pick n Pay came nowhere in the Favourite Family Restaurants category.

There’s a subtle war of words in the media between Clicks and the independent pharmacies with which it competes. Recently, we reported that USAP, a grouping of independent pharmacies, had released results of a survey which suggested that the punters are more interested in convenience and tender words when it came to their pharmaceutical requirements than they were in price. Now Clicks skipper David Kneale has come back with a raking broadside, suggesting that customers may be paying more on their dispensing fees and admin costs than they will at in-store pharmacies and by inference, Clicks itself. Clicks currently owns around 15% share of the prescription market and is facing stiff competition from all sorts – Shoprite, Pick n Pay, Dis-Chem, and the plucky independents themselves.

Comment: Don’t know about you, but we find there’s something unsavoury about the big boys circling the independent sector and licking their chops. Small businesses, even in retail, are the safety net of any economy.

Clicks-baiting mega-chemist Dis-Chem, having gone all Pty last year, and expanded all over the place has pulled another one out of the proverbial hat: franchise! Three franchise stores – in Nelspruit, PE and East London – have been added to the 37 company-owned stores. According to the Saltzmanns, who founded Dis-Chem in 1978, the only limit to Dis-Chem’s growth has been the shortage of skilled and committed managers – hence the move to franchise, where entrepreneurs grow on trees. Touchingly, the first of Dis-Chem’s eleven approved franchisees are a couple who met while working the graveyard shift in the aisles at Dis-Chem. Dis-Chem’s recent move into centralised distribution now makes that much more sense.

Comment: Although the new Consumer Protection Act is going to make life tricky for franchisors, defining franchisees as customers, which gives them the freedom to shop wherever they want.