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Private label a tonic as Clicks bests Dis-Chem

PRIVATE label products, growth in its wholesale business, smaller stores and new outlets are among the reasons Clicks turned in yet another strong performance, outpacing its rival Dis-Chem. A star performer for the retailer’s interim results for the six months to February 28 was its pharmaceutical wholesaler and distributor, UPD, in which Clicks has made hefty investments. Operating profit for the UPD business surged 27.2 percent. The business has landed four new distribution clients, according to CEO Vikesh Ramsunder.UPD market share grew to 26 percent from 25.4 percent in the reporting period.

The retailer, which has benefited from its “buy three products and pay for two” promotional activity, said customers had made a significant shift to Clicks’ private label products .Group turnover increased 6.2 percent to R15.3-billion. Retail sales grew by 7.7 percentand by 4.5 percent in comparable stores, with selling price inflation of only 1 percent. Profit for the period rose 13 percent to R764-million.Ramsunder said the group has a very clear strategy in a tough economic environment and will continue to open new stores and pharmacies.

Evan Walker, a portfolio manager at 36ONE Asset Management,said the group was performing “unbelievably well” because of a combination of factors including Clicks’ loyalty programme in the form of its Club Card and the retailer’s attractive price points. Renier de Bruyn, an investment analyst at Sanlam Private Wealth, said Clicks displayed resilient results in the context of a constrained consumer environment and low selling price inflation. He said the retailer’s growth was supported by the continued roll-out of new stores and their success in clinching market share from independent pharmacies. Walker said the odds are against rival Dis-Chem despite its strategy of larger store formats that investors thought would bode well for it. He said that contrary to the belief in this big-box formula being rolled out more efficiently than the Clicks business model, there have not been any detrimental effects on Clicks.Other retailers had lost markets hare to both Dis-Chem and Clicks, he said.

Clicks invested in 33 new stores and 35 pharmacies. It has also extended store space in 25 stores over the past 12 months. The group plans to open 41 stores in the financial year. It currently has a store network of 680 and aims to have 900 with a pharmacy in each store in the next seven to 10 years

Ntando Thukwana: Business Times, 21 April 2019