Beauty and pharmaceutical retailer Clicks Group 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% to 12% in the year through August, the Cape Town-based company said in a statement on Thursday. EPS on that basis gained 10% to 157.4 cents in the six months through February as first-half sales rose 9.6% to R9.3-billion ($878-million), Clicks said.
The South African "consumer condition is stable," chief executive 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% in February, from 6.8% the previous month as rising unemployment and inflation curbs spending.
Clicks's volume growth was supported by discounting and promotions, which accounted for 26% of sales in the period. There will be increased discounting in the second half, the chief executive said.
Sensitive markets
"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% higher and the company's retail pharmacy market share rose to 17.6%, from 16.6%, he said. Sales at UPD, the company's wholesale and distribution unit, will slow in the second half after rising 15% in the first, Kneale said.
The company said it's raising its interim dividend 10% to 53.5 cents per share. – Bloomberg