Clicks shelves will be well-stocked for festive shopping

JSE-listed healthcare, electronics and baby retailer Clicks says the trouble at the country’s ports – following the wage-related strike at Transnet – as well as supply-chain disruptions linked to China’s Covid-related lockdowns will not impact its Christmas stock, nor disrupt festive season shopping for consumers.

“Our inventories remain at healthy levels,” Clicks CEO Bertina Engelbrecht tells Moneyweb.

She says lessons learned from supply-chain disrupting events such as the Covid-19 pandemic in 2020, the July unrest last year, and more recently Russia’s invasion of Ukraine in February as well as China’s strict policy on Covid-related restrictions that resulted in the irregular supply of goods, have taught retailers to plan ahead to avoid empty shelves.

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“Retailers make decisions on Christmas between April and July … In fact, we go through a tremendous process to decide what the ranges are going to be, what the price-points are going to be so our planning is on track for our festive season trading period.”

For the 2022 period, total group inventory days were six days more than reported in 2021 – coming in at 72 days, up from 66 days in 2021.

Inventory days measure how long a product remains in storage before eventually being sold to the consumer. For its retail operations, inventory days were slightly lower this period at 71 days down from 74 days. This decline Clicks says is because the previous year accounted for Covid-19 vaccine stock which has since lowered in line with reduced uptake of the vaccine.

Clicks CFO Michael Fleming further notes: “Both local and global disruptions to supply chains continue to persist and we’ve therefore bought in certain imported Christmas stock earlier this year to ensure supply over the key festive trading period which has added about one day to current retail inventory days.”

According to Engelbrecht, the group has ensured it can hold extra stock not only in preparation for the busy festive season, but to also protect its consumers from price-shocks driven by dwindling supply as a result of supply-chain disruptions.

Pricing pressures

Executives at Clicks say the group has kept its internal selling price inflation at 4%, slightly above the 3.2% it reported for its financial full-year to end-August 2022. However, they stress that this is still considerably below the headline consumer-price index of 7.5%, which was reported by Statistics SA on Wednesday.

The group further notes that given the current inflationary environment, consumers are expected to continue feeling the pinch.

Read: Inflation slows but interest rates set to rise … again

“Trading conditions will remain extremely constrained owing to the increasing pressures on consumer disposable income in the current low growth, high inflationary environment,” group adds.

Clicks says it will continue to do what it can to shield its consumers from higher prices, and deliver the value expected at competitive prices. However, the retailer does note that a key challenge to this remains the country’s unstable power supply which has contributed to higher group operating costs.

According to Engelbrecht, the group lost up to 34 000 trading hours in FY 2022 as a result of load shedding – up from 13 000 hours in the prior year.

As a result, the group has committed to investing in alternative energy sources. During the financial year, the group installed solar panels at its Clicks and UPD distribution centres around the country.

Read:
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FNB Wealth and Investments portfolio manager Wayne McCurrie tells Moneyweb that Clicks has delivered a strong full-year performance, adding that the company is still a good buy for those looking to get in. However, he did caution against its share price.

“Clicks have had fantastic results for a very long time. The only problem with Clicks is that their share price always looks expensive,” adds McCurrie.

“I’m not saying that it will, but if something ever goes wrong there, that share price is priced for perfection so you’re going to see a dramatic fall in the share price, that is my only worry about Clicks.”

McCurrie says that it’s important to look at Clicks’s reported load shedding impact within context. He points out that even though the group says it has lost over 30 000 trading hours as a consequence of power cuts, this loss is relatively minimal in comparison to businesses in the manufacturing and mining sectors which unlike Clicks cannot produce output during those load shedding times.

“If you were going to buy a toaster at Clicks, you were just going to buy when there is no load shedding, so the loss in turnover is not proportional to the number of hours you couldn’t trade.

“Obviously load shedding has a negative effect on everyone in South Africa … However, with a company like Clicks, it’s not as negative as for say a manufacturing firm.”

Listen as Engelbrecht discusses the group’s latest full-year results: