South African retail giant Clicks Group has announced a robust 13.5% increase in operating profit in its latest interim results, signaling resilience amidst a challenging operating landscape. The company also revealed plans to further expand its retail footprint, undeterred by potential disruptions surrounding the upcoming national election.
In its interim results for the six months ended 29 February 2024, Clicks Group highlighted significant achievements across various operational fronts. The company reported a notable surge in operating profit, driven primarily by heightened demand in the beauty and personal care segments. This growth was complemented by the expansion of the Clicks ClubCard loyalty program, which saw a substantial increase in active members over the past year, reaching a commendable milestone of 11 million users.
Moreover, Clicks Group reinforced its market presence by opening a net 41 new stores during the reporting period, bringing its total retail footprint to 902 stores. The successful integration of recent acquisitions, including Sorbet, M-Kem, and software development company 180 Degrees, further bolstered the company’s performance, surpassing pre-acquisition expectations.
Financially, Clicks Group witnessed significant growth across key metrics. Turnover surged by 9.0% to R21.8 billion, while total income soared by 14.1% to R6.6 billion. Despite a 14.8% increase in retail costs, primarily attributed to higher depreciation charges and expenses related to recent acquisitions, the company managed to enhance its operating profit by 13.5% to R1.9 billion. This translated to a commendable operating margin improvement of 30 basis points, reaching 8.5%.
Headline earnings surged by 10.5% to R1.3 billion, with headline and diluted headline earnings per share witnessing a robust growth of 13.0%, reaching 534 cents. Reflecting its commitment to shareholders, Clicks Group declared an interim gross ordinary dividend of 210.0 cents per share, representing a noteworthy increase from the previous interim dividend.
In line with its expansion strategy, Clicks Group outlined ambitious plans to open an additional 50 to 55 stores during the current financial year, with a focus on enhancing its pharmacy network. A substantial capital investment of R920 million is earmarked for the fiscal year, with a significant portion allocated to new store openings, refurbishments, and investments in supply chain, technology, and infrastructure. Notably, the company continues to prioritize sustainability initiatives, with investments in renewable energy solutions aimed at reducing its carbon footprint.
Despite its strong performance, Clicks Group remains cognizant of the prevailing economic challenges in South Africa. The company anticipates subdued consumer spending due to inflationary pressures, compounded by potential disruptions associated with the upcoming national election and the resumption of load shedding. Nevertheless, Clicks Group remains optimistic about its outlook, with directors forecasting a promising increase in diluted headline earnings per share for the fiscal year ending 31 August 2024.
The company’s forecast is contingent upon several assumptions, including the continuation of constrained trading conditions, elevated consumer inflation, political uncertainty surrounding the general election, and ongoing electricity challenges. However, Clicks Group remains steadfast in its commitment to delivering value to shareholders and driving sustainable growth amidst a dynamic operating environment.
In conclusion, Clicks Group’s impressive interim results underscore its resilience and adaptability in navigating complex market dynamics. With a solid growth trajectory and strategic initiatives in place, the company is poised to capitalize on emerging opportunities while mitigating potential risks, ensuring long-term value creation for stakeholders.
