Clicks Group Ltd., a South African beauty and pharmaceutical retailer, forecast higher earnings this year as the opening of 25 stores will help offset weak consumer spending.
Diluted earnings per share excluding one-time items will rise 8 percent to 12 percent in the year through August, the Cape Town-based company said in a statement today. EPS on that basis gained 10 percent to 157.4 cents in the six months through February as first-half sales rose 9.6 percent to 9.3 billion rand ($878 million), Clicks said.
The South African “consumer condition is stable,” Chief Executive Officer David Kneale said in a telephone interview. “It’s not getting materially worse, nor is it getting better at any speed.”
South African retail sales growth slowed to 2.2 percent in February, from 6.8 percent the previous month as rising unemployment and inflation curbs spending.
Clicks’s volume growth was supported by discounting and promotions, which accounted for 26 percent of sales in the period. There will be increased discounting in the second half, the CEO said.
“At the best of times health and beauty are promotional-sensitive markets and especially so as consumers seek value,” Kneale said.
More than half of the 25 new stores were opened in the first six months, Kneale 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’s sales, he said.
Pharmacy sales were 13 percent higher and the company’s retail pharmacy market share rose to 17.6 percent, from 16.6 percent, he said. Sales at UPD, the company’s wholesale and distribution unit, will slow in the second half after rising 15 percent in the first, Kneale said.
The company said it’s raising its interim dividend 10 percent to 53.5 cents per share.