"The health and beauty markets have been reliant on promotional activity to sustain sales volumes and attract value conscious consumers. As we had anticipated‚ selling price inflation has remained low‚" he said.
In the year ending August‚ Clicks Group turnover increased by 9.2% to R15.4bn‚ with selling price inflation of 0.5% for the year. Retail turnover grew by 8.2% with inflation of 0.7%‚ while UPD (it's pharmaceutical wholesaler) increased turnover by 11.1% with price inflation averaging 0.1%.
Operating profit increased by 7.9% and exceeded R1bn for the first time‚ the company said.
"In this environment the group has focused on staying competitive and maintaining tight expense control while continuing to invest for long-term growth‚" the company said.
To this end Clicks has committed capital expenditure of R356m for next year to be used for new stores‚ new pharmacies‚ store revamps‚ IT systems and the expansion of UPD's distribution infrastructure. Trading space is planned to increase by 4% to 5%‚ it said.
The company will be opening a new store in Lesotho within the next two weeks and in Namibia within the course of the year. "Unlike other retailers we still see lots of scope for growth in SA‚ in new stores and new pharmacies‚" Kneale said.
He said the company planned to open about 20-30 stores in the coming year.
Clicks increased turnover by 9.2% as inflation averaged only 1.2% for the year. Comparable store sales grew by 5.9%. The chain's store footprint was expanded to 420 following the opening of a net 20 new stores. The pharmacy base was extended by 23 to 306.
Musica also delivered a phenomenal performance‚ Kneale said.
"Tight cost control‚ the closure of marginal stores and the focus on big shopping centres and new areas of technology contributed to its performance‚" he said.
"The demise of the CD has been greatly exaggerated." The closure of 14 Musica stores contributed to operating profit increasing by 36.3%. The Body Shop increased turnover by 14.1% with price deflation of 1.9%‚ and grew operating profit by 15.9%.
Syd Vianello‚ a Nedgroup Securities analyst said the company had underperformed relative to its retail peers. "The days of low cost growth may be over‚ and management has admitted to making some mistakes in this regard with wage costs."
"On the positive side they have turned around UPD nicely and Clicks had a better second half. It is not all doom and gloom."
Kneale said the consumer would remain under pressure in the medium term. "We do not see a any significant recovery in the economy within the next 12 months. Consumers will be looking for more value and we will look to maintain costs‚" Kneale said.
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