Clicks veteran sticks with winning vision
The new CEO of healthcare and beauty retailer Clicks, Vikesh Ramsunder, is sticking to the company's roots as he settles in to the top post.
Ramsunder, who has been with the group for 25 years, took over as CEO on January 1, succeeding the long-serving David Kneale.
His predecessor was brought in from the UK's Boots chain in 2006 to revitalise a Clicks that was ailing at the time, and grew the chain from a market capitalisation of R5bn to almost R50bn. Under his leadership, the retailer also saw its breakthrough as it joined the JSE's top 40 listed companies.
Ramsunder is the beneficiary of a resilient company that is the market leader in the healthcare and beauty retail sector. It has bucked the trend of a weak economic environment that competitors have blamed for their subdued growth.
"Most businesses that are successful, it is when they are true to their founder's vision," Ramsunder told Business Times this week.
Clicks was the brainchild of retailer Jack Goldin, who established it in 1968. It wasn't until 14 years ago that the chain started growing substantially, after the 2003 amendment to SA's Pharmacy Act. The group moved to introduce pharmacy dispensaries in Clicks stores, opening its first pharmacy in 2004.
"We've always wanted to be a pharmacy chain. So when the legislation changed, we were early adopters of that because it was core to our business. It is in our DNA," said Ramsunder.
The group also started to service state patients at about 200 chronic-medication pick-up points. This means patients do not have to queue at state clinics but can have their medicines delivered to a Clicks pharmacy for collection.
"We open a pharmacy wherever we get a licence to," said Ramsunder. "Our ambition is to have a pharmacy in every Clicks store, even if it's in a township or in the middle of Sandton."
When Ramsunder was named CEO of the Clicks group, he pledged that the company's strategy would remain unchanged and that he would continue with the formula of focusing on growing the health and beauty segments as well as pharmaceutical wholesaling.
"Our strategy is strong," he said. "There may be some positive years and there may be some tougher years, that's typical. But the core strategy remains intact."
The group brought home a good set of results in its trading update for the 20 weeks to January 13, with sales growing 8.6%. Over the past five years, Clicks's share price has surged 194%, making it the best-performing stock in the JSE's food and drug retailers index.
Ramsunder said the group's aim to expand its store base to 900 in SA within the next seven to 10 years was on track. The group currently has 680 stores, including 528 in-store pharmacies.
"We have publicly said that we could get to 900 stores in SA. We know where they are, we're already talking to landlords and, as opportunities become available, we will access these opportunities," he said.
The group's strategy of keeping to smaller stores is about offering consumers convenience, unlike rival Dis-Chem's vast stores.
"Having a smaller store in an online world . is an advantage because you are now moving online, closer to the customer," Ramsunder said.
"I am quite excited by the headroom that we have for growth in the domestic market. We understand that there are economic challenges, we get that, but if you look at the market dynamics people are living longer, so that helps the pharmacy."
The group will report its interim results on April 17.
Product innovation is where analysts think there is room for growth.
Lulama Qongqo, a consumer analyst at Mergence Investment Managers, said: "South African retailers could potentially increase their average basket sizes for certain product categories, such as makeup, if they were more innovative about product testing and bundle offering online."She added that Clicks could expand its African hair-care offering.
Lester Davids, a trading desk analyst at Unum Capital, said a potential growth area for Clicks was beauty and personal care. "This area unfortunately has limited product innovation. However, [it] is boosted by promotional activity." He saidethnic hair care, gifting and wellness (The Body Shop) had been extended to 48 stores in the 2018 financial year and "should provide a higher contribution to the group over the long term".
Tough competition from Dis-Chem has "forced the group to tighten its already sharp focus", Davids said.
But with Dis-Chem as a "formidable competitor for Clicks - especially in the independent pharmacy space now that Dis-Chem is setting its eye on consolidating the industry to fill up its newly added capacity in their wholesale business - we're yet to see how Clicks is going to respond", Qongqo said.