‘Non-existent’ flu season negatively impacts Clicks’ pharmacy sales

A Clicks store. Picture: Supplied

Despite the knock to pharmacy sales, Clicks reported that total retail sales grew by 6.3% for the 23-week period from 1 March to 9 August this year.

Retail healthcare giant Clicks on Wednesday noted in a voluntary trading update that pharmacy sales in South Africa “have been negatively impacted as the country has not experienced a traditional winter cold and flu season”.

The group did not mention the extent of the impact, however, it highlighted that colds and flu are generally strong drivers of sales growth for the company.

“The incidence of colds and flu has been limited as South Africans are wearing face masks during the pandemic, social interaction has been limited, schooling restricted and large numbers of people are working from home,” it pointed out.

Despite the knock to pharmacy sales, Clicks reported that total retail sales grew by 6.3% for the 23-week period from 1 March to 9 August this year.

The relatively strong performance in the face of Covid-19, saw its share price rise more than 5% (to around R241) in midday trade on Wednesday.

Clicks intraday share price vs JSE All Share – Source: Moneyweb

Clicks said that group turnover increased by 10% to R32.3 billion in the 49 weeks to 9 August.

“Clicks Group presents the following update to provide insight into the group’s trading performance against the background of the Covid-19 pandemic and the resultant national lockdown.

“This 23-week period covers trading from the start of the second half of the group’s financial year, including the period immediately before the country entered varying levels of lockdown from 27 March, and the subsequent four months of trading,” it noted.

The group added that retail health and beauty sales, including Clicks and the franchise brands of The Body Shop, GNC and Claire’s, increased by 7.7% over the corresponding 23 weeks in the previous year.

This contributed to the group’s overall retail sales growth of 6.3% for the period.

“As an essential healthcare service provider Clicks has traded throughout the lockdown period, although [the group] has been restricted to shorter trading hours and was limited to selling only essential products under lockdown level 5 until April 30, 2020,” it said.

“Trading patterns shifted as customer shopping behaviour changed in response to the various lockdown level restrictions and consumers chose to stay home to reduce the risk of contracting Covid-19,” it noted.

“Online sales in Clicks have shown significant growth since the start of lockdown.

“The investment made in its online and digital capability over the past four years enabled the brand to manage the increased demand and ensure an efficient and convenient service to customers,” the group added.

Clicks said that while it has experienced a decline in the frequency of customer visits during the lockdown, the average basket value of goods sold has increased during this time.

“The decline in footfall at super regional and regional malls across the country has impacted sales in destination stores.

“However, Clicks is well positioned in this environment with over 70% of its stores located in convenience and neighbourhood shopping centres,” it pointed out.

The group expects diluted headline earnings per share for the year ending 31 August to increase by 10% to 15% to between 730 and 763 cents (2019 FY: 663.6 cents).

It noted that the figure for 2019 was restated following the adoption of IFRS 16.

“The growth in earnings is supported by the group’s tight cost management, continued working capital efficiency and the performance of UPD [United Pharmaceutical Distributors] which gained new contracts and traded strongly throughout the year,” it noted.

This article first appeared on Moneyweb and was republished with permission.

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