The economic fallout from the Covid-19 pandemic may have significantly disrupted the

economy but Clicks has no intention of slowing down its store refurbishment and expansion

plan.

The pharmaceutical, beauty and health retailer, which delivered double-digit earnings growth

for the year ended August, has earmarked capital expenditure of R745m for the 2021

financial year. This will be spent on 45 store refurbishments, 25 to 30 new Clicks stores and

30 to 35 new pharmacies.

Clicks CEO Vikesh Ramsunder said this week: "The biggest mistake retailers make in tough

times is they don't spend money on making sure their stores are upgraded and fresh. Say

the economy takes 10 years to turn, and it will turn, your capex bill to sort out your business

then will be enormous and you just can't recover it.

"Even though times are tough, we will continue revamping stores because then we are

eating the elephant one small piece at a time."

Long-term plans for new stores will focus on SA, Ramsunder said. The target is 900 stores

in SA from the current 704. The group has 39 outlets in neighbouring African countries. It will

continue its pharmacy expansion with the goal to have one in each store. It has 585

pharmacies.

"There is still an opportunity for organic growth in the country in the next five to seven years.

That is why the strategy remains intact," Ramsunder said.

Expansion in neighbouring countries will be modest. Ramsunder said the group does "not

have an African expansion strategy" because it is "truly a South Africa-focused business.

There are sufficient consumers in the [South African] market for us to meet their needs."

The focus on SA has paid off. Clicks' diluted earnings per share rose 13.7% to 754c for the

year to August 2020, which was attributed to "tight cost management, solid retail health and

beauty sales" and a "strong performance" from UPD, its pharmaceutical wholesaler.

The 450c per share final dividend, which equates to R1.1bn, was more than 37% higher than

the 327c in the previous year. After-profit tax increased 11.8%.

Alec Abraham, a senior equity analyst at Sasfin Wealth, said Clicks has a "very defensive

business" and "some huge advantages" over rivals because of its "ubiquity", referring to the

group's statistic that there is a store within 6km of half of SA's population.

Competitor Dis-Chem has 181 stores.

Abraham said the plan to expand to 900 Clicks stores is a "very achievable target".

Ramsunder said more retail space is coming up as mom-and-pop shops come under

pressure and close. An example is Khayelitsha, where Clicks has "been trying to get into for

years".

"All the products we sell, customers need, and we couldn't find retail space. In this year we

will open three stores in Khayelitsha because tough market conditions have made more

retail space become available."

But Ramsunder said the group is not "taking space opportunistically", and that it "knows

when it wants to open and where".

"We have mapped the country and there are almost 300-400 locations that we have our eye

on at any given time. And when those opportunities become available we will enter those

markets. What Covid is doing is it is accelerating those opportunities. Other retailers are

going out of business."

He said landlords are now able to "give us 500-600m more space at times".

"In a way the dynamics have made us move forward a little bit quicker than we normally

would have."

As far as what its consumers were buying, Ramsunder said because there has been

"virtually no cold or flu season" because of the lockdown, pharmacy sales grew just 3.2% in

the year under review. But the sale of vitamins and supplements increased more than 23%

as people tried to stay healthy in the pandemic.

"This is where the defensiveness of the chain comes in. If you're sick we can serve you in

the pharmacy; if you don't want to be sick we can help prevent you from getting sick."

Another big growth driver for the group was its baby category, with sales growing almost

25%. "You can understand how defensive the baby category is. The baby doesn't care that

there's Covid-19. Babies still need what babies need and they are still being born," said

Ramsunder.

Other items that did "very well" included general merchandising, particularly electrical

appliances such as blenders and air fryers, as people did more cooking at home.

And with salons closing, sales of hairdryers, nail dryers and nail polish were robust.

"In a normal world we have everything that customers need. In a Covid world, we have

categories that customers need."

As for the EFF protests against the group in September after a racist TRESemm advert

was carried on Clicks' website, Ramsunder said he was still speaking to insurers about the

damage to business premises and earnings.

"We are busy with our insurers on that. The month of September was disrupted in terms of

trade. The insurance would potentially cover the losses in that regard. There is no real

impact on the earnings for the company."

However, he said the group had been "more concerned about how consumers would react".

That was my biggest worry. What I can see from consumer behaviour, there is no protest

action against the company. Trading patterns have returned to normal in October. By normal

I mean Covid normal, to what they were before the advert."

Questions

2.1 Clicks CEO Vikesh Ramsunder, sees opportunity in the most adverse of times and

makes reference to mistakes that retailers make in such situations.

In this context, critically discuss leadership as a driver of strategy implementation (10)

2.2. Explain the relationship between Clicks strategy and the organisational culture at

Clicks (10)

2.3 Vikesh Ramsunder demonstrates extensive knowledge on his product portfolio,

customer need and wants, competitor activity, his value chain and the industry in

general.

Assume the position of a competitor to Clicks and conduct a PEST ( Political, Economic,

Socio Cultural, Technology) analysis either supporting or opposing the views stated by

Vikesh