Beauty and pharmaceutical major Clicks has posted growth in the first part of its financial year, but cracks showed beneath the headline numbers as fierce competition and an internal systems failure weighed on retail performance during the crucial festive season.
The group said in a trading statement on Thursday turnover increased 7.4% in the 20 weeks to mid-January boosted mainly by strong pharmacy and distribution sales. But retail growth lagged behind, with the group acknowledging that execution issues cost it meaningful sales.
Warehouse delays
CEO Bertina Engelbrecht said Clicks’ performance was held back by aggressive discounting by competitors over the festive period, as well as delays in rolling out a new warehouse management system at the group’s Cape Town distribution centre.
Those delays reduced product availability in Western Cape stores at peak trading times, resulting in an estimated sales loss of about R120m. While availability has improved since early January the group expects stock levels to normalise only during February.
Retail sales growth slowed compared with last year, with comparable store sales rising at a more modest pace. Clicks said price inflation remained contained and volume growth was positive but lower than in the previous year as consumers faced ongoing pressure.
Pharmacy sales bolster group
Pharmacy stood out as the group’s strongest retail category. The group said strong demand for healthcare products, combined with record Black Friday sales and solid Christmas gifting, helped offset some of the weakness in discretionary spending.
The group’s distribution arm also played a stabilising role. UPD’s core wholesale business benefited from higher purchasing compliance and the continued rollout of new Clicks pharmacies. However, this was undermined by the loss of two bulk distribution contracts last year, which reduced overall managed turnover.
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