Clicks earnings in good health

Clicks has changed its beat. The retailer now makes three times more from pharmaceuticals than it does from music, the company's results for the six months through February showed.

Sales at Musica, the group's chain of music stores, have dropped by 1.4% compared to a year ago, and revenue from Clicks Pharmacies has grown by more than 13%. Musica has a turnover of R495-million, and the pharmacies churn out more than R1.5-billion.

With sales growth of more than 13%, pills and the like are catching up with Clicks' beauty division, which grew by a more modest 7%.

Beauty and personal care account for a third of the sales in Clicks stores, and pharmacies now account for 25.2%.

The retailer yesterday forecast higher earnings this year as the opening of 25 stores will help offset weak consumer spending, the company said.

The South African "consumer condition is stable", CEO David Kneale said.

"It's not getting materially worse, nor is it getting better at any speed."

South African retail sales growth slowed to 2.2% in February, from 6.8% the previous month, as rising unemployment and inflation curb spending.

Clicks' volume growth was supported by discounting and promotions, which accounted for 26% of sales in the period. There would be increased discounting in the second half, Kneale said.

"Health and beauty are promotional-sensitive markets and especially so as consumers seek value."

More than half of the 25 new stores were opened in the first six months, he said.

Self-medication and an increasing use of generics are also trends that Kneale expects to continue.

Private label and other agreements, which provide higher margins, account for almost a fifth of Clicks' sales, he said. Pharmacy sales growth helped the company's retail pharmacy market share rise to 17.6%, from 16.6%, he said.

The company said it was raising its interim dividend by 10% to 53.5c a share.