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AGM Annexure 1 Analysis of Shareholders Shareholders' Diary Definitions

 

Clicks

Review of the year

Clicks continued to produce strong sales and profit growth for the year as the business realised the benefits of a focused strategy and the sustained investment that has been made in stores, processes and people in recent years.

The defensive nature of Clicks was again highlighted as the health category grew by 30% in the tough economic environment while the beauty business also proved resilient and lifted sales by 14%. Collectively health and beauty merchandise now account for 77% of Clicks sales.

Clicks’ market leadership was affirmed when the chain was again voted the country’s number one specialist health and beauty retailer in the Sunday Times Top Retail Brands survey.

The pharmacy expansion programme continued to gather momentum with the opening of 50 new in-store dispensaries, bringing the national pharmacy base to 207 at year-end. Clicks pharmacies process around 1.2 million prescriptions per month and generated turnover of R1.4 billion, resulting in a strong gain in market share.

While pharmacy has been a major sales driver, front shop health products as well as baby merchandise also experienced excellent growth.

Following the group’s acquisition of courier pharmacy Direct Medicines, the business was rebranded as Clicks Direct Medicines and integrated into the Clicks healthcare marketing proposition.

The general merchandise category, which accounted for 23% of sales, continued to be impacted by the slowdown in discretionary spending. The overall growth of 6% in general merchandise was mainly driven by the convenience categories of cleaning aids and confectionery. General merchandise is core to the customer offer as it enhances margin, increases basket value and positions Clicks as a destination for gifting.

The private label and exclusive brands strategy is a key driver of sales and margin and accounted for 17.6% of sales across all merchandise categories. Private label products offer better value to customers and entrench loyalty to the brand. During the year the first private label medicines and colour cosmetics products were introduced.

The active ClubCard membership base grew by 130 000 to 2.65 million customers. ClubCard accounted for 70% of sales in the year, with over R160 million being returned to customers in cash-back vouchers.

Clicks expanded the store base to 346 following the opening of a net 20 stores. The Blueprint store design which accentuates Clicks’ health and beauty focus has been completed in almost 150 stores and continues to be rolled out at a rapid pace.

A new store design for the beauty department was piloted during the year and following favourable customer response will be incorporated in all new and revamped stores.

The Blueprint Retail project to review stock management processes, compliance and staff scheduling has been completed in 89% of stores and contributed to improved operating efficiencies in the business.

Focus for 2010

Clicks plans to aggressively increase the scale of the business and expects to open 20 to 30 stores in 2010. These new stores, together with further dispensaries being opened in existing stores, will increase the number of pharmacies by between 30 and 40. At the same time Clicks will grow sales volumes through Clicks Direct Medicines through its unique offer to medical aids.

Homeware is a key focus for Clicks and the customer offer will be enhanced by improving the in-store experience and capitalising on opportunities in bathroom and kitchenware.

As part of the programme to drive operational excellence through continuous improvement the centralisation of the supply chain will be completed in early 2010.

Management recognises that customer service excellence is dependent on the quality of the people and is committed to investing in staff to ensure they are visible, friendly and knowledgeable in meeting the needs of customers.

In the medium-term Clicks plans to grow the chain to at least 500 stores and remains committed to opening a dispensary and clinic in every store. Beauty and home also present exciting longer term growth prospects, underpinned by the development of private label and exclusive brands which is targeted to grow to between 20% and 25% of sales.

Clicks aims to achieve an operating margin of 6% to 7% in the medium term by capitalising on opportunities to extend the scale of the business and maximising organic growth prospects.

Market share (%)	2009	2008
Retail pharmacy*	11.1	9.0
Front shop health products**	37.2	35.5
Beauty products**	24.5	25.0
*Per IMS **Per AC Nielsen