Clicks Group Ltd., a South African cosmetics and pharmaceutical retailer, forecast higher earnings this year as promotional offers and new drugstores offset sustained weakness in consumer spending.
Sales growth of 14 percent in the six months through February was supported by promotional activity, which accounted for 29 percent of revenue, Chief Executive Officer David Kneale said by phone on Thursday. Cape Town-based Clicks plans to offer more discounts in the second half of the year, he said.
“I can’t see any reason consumers are going to feel more confident in the next six months,” he said. “You’re seeing fuel prices move up again, you’ve got taxes increasing and you’ve got load shedding or the prospect of load shedding, which makes people feel uncertain as well,” he said, referring to the local term for power cuts.
South African shopping chains have been struggling amid unemployment of about 25 percent, high levels of personal debt and as shoppers stay away from malls during nationwide rolling blackouts caused by a power shortage.
Clicks will also boost sales through the opening of 15 new stores in the six months through August, Kneale said, including two in Namibia. The company plans to increase the number of stores in Botswana over the next three years, and may then expand into East Africa. In South Africa, Clicks aims to have 600 stores within seven years, compared with 473 outlets now.
The shares climbed 3.1 percent to 98.59 rand as of 12:09 p.m. in Johannesburg, extending their gain this year to 22 percent. The FTSE/JSE Africa Food & Drug Retailers Index is up 7.7 percent this year. Clicks is valued at 24 billion rand ($1.96 billion)
Diluted earnings per share excluding one-time items will rise 10 percent to 15 percent in the year through August, the company said in a statement. That’s in line with a 13 percent increase reported in 2014. The retailer raised its half-year dividend by 22 percent to 65.5 cents per share.