Clicks, SA’s largest pharmacy chain, has become the fourth major retailer to warn of poor sales in July and August as a result of the recent civil unrest and the lingering effects of the third wave of Covid-19.
Clicks which issued a trading update on Tuesday says sales in the last seven weeks of its financial year — in July and August — were hit by the riots that led to looting, damage and destruction of businesses. Clothing retailer Truworths, Massmart which owns Game and Makro, and Mr Price have all reported weaker July or August sales compared with 2020, when the country was emerging from the worst of the Covid-19 lockdown.
KwaZulu-Natal and parts of Gauteng were plunged into chaos in July as the arrest of former President Jacob Zuma sparked protests that descended into wide-scale looting and damage to property. Some economists have warned that jobs lost due to the violence may not be replaced as businesses struggle to rebuild. Finance minister Enoch Godongwana last week said the effect of the looting and damage on GDP could linger for the next six quarters.
“Trading in the affected areas remains well below the levels of the previous year, and this is expected to continue in the short term,” Clicks said.
Many retailers experienced better-than-expected sales thanks to pent up demand after the hard lockdown April and May 2020 and robust consumer activity at the beginning of 2021. But sales are now contracting after the Delta variant of Covid-19 prompted tougher restrictions thatwere finally eased at the beginning of the week.
Clicks also said revenue for the year ended August 2021 would be flat as a result of the civil unrest and that about 70% of insurance payouts will only arrive after its August year-end. The company is fully covered for damage, theft and business interruption by its ordinary insurance and the SA Special Risks Insurance Association (Sasria). It has received has received R217m of its total R726m of insurance claims to date.
The company’s business is considered defensive — it is less susceptible to economic downswings as its products are considered essential — but sales are forecast to rise no more than 3% due to losses from the looting of 53 stores, and the temporary closure of some damaged stores.
Clicks which also owns UPD, a medicines wholesaler that supplies large hospital groups, said revenue would have risen 8% to 13% has there not been unrest, with UPD revenue up 12.3% and Clicks and other retail stores posting 8.3% sales growth.
There are still 11 group stores closed, with five set to reopen before February and four by August 2022 and two only after August 2022. A warehouse belonging to UPD was also looted.
The looting increased costs as UPD had to use air transport to supply customers, such as hospitals, with emergency medicines after the unrest led to the closure of several major roads.
Clicks, which is operating 300 Covid-19 vaccination sites, said it had administered 596,180 shots since the programme started. It expects to have 568 stores offering jabs by the end of September, allowing it to administer 615,000 doses a month.
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