Clicks Sees Earnings Rising on Resilient Health, Beauty Markets

Clicks Group Ltd., a South African beauty and pharmaceutical retailer, forecast higher earnings this year, citing expectations that demand for its products will remain resilient despite a weakening outlook for consumer spending.

Diluted earnings per share excluding one-time items will rise 10 percent to 15 percent in the year through August, the Cape Town-based company said in a statement on Thursday. That compares with a 14 percent earnings increase reported in 2015. Profit by the same measure gained 15 percent to 2.04 rand in the six months through February, while revenue increased 13 percent to 12.7 billion rand ($890 million).

South African retailers are facing headwinds including weak domestic consumer confidence, rising interest rates and a depreciated rand, which remains 15 percent weaker relative to the dollar compared with a year ago. The central bank forecasts economic growth for South Africa this year of 0.8 percent, which would be the slowest pace since the 2009 recession.

“The core health and beauty markets in which the group trades are relatively resilient to economic downturns,” the company said. “Clicks also has considerable scope to expand its store and pharmacy footprint in South Africa.”

Clicks expects selling price inflation of 4 percent to 5 percent in the financial year, with an “increasingly challenging” consumer spending environment in the six months through August. The company forecast a record 455 million rand of capital expenditure for the financial year.

Before it's here, it's on the Bloomberg Terminal.