Pharmacy sales are down as South Africa skips traditional cold and flu season

Retail healthcare group Clicks says that its pharmacies have taken a sales knock, as the preventative measures adopted to stop the spread of Covid-19 has seen South Africa skip its traditional cold and flu season.

In a voluntary trading update published on Wednesday (12 August), the group said that as a result of mask-wearing, social distancing, and working from home, incidence of colds and flu has been limited in 2020.

“Pharmacy sales have been negatively impacted as the country has not experienced a traditional winter cold and flu season which is generally a strong driver of sales growth,” it said.

“The incidence of colds and flu has been limited as South Africans are wearing face masks during the pandemic, social interaction has been limited, schooling restricted and large numbers of people are working from home.”

As an essential service, Clicks has been able to operate throughout lockdown, since it was implemented on 27 March.

The group noted a shift in trading patterns over the period as customer shopping behaviour changed in response to the various lockdown level restrictions. Most notably, consumers chose to stay home to reduce the risk of contracting Covid-19.

As a result, online sales saw significant growth, while Clicks reported a decline in the frequency of customer visits during the lockdown, although the average basket value has increased over this time.

Trading update

Retail health and beauty sales, including Clicks and the franchise brands of The Body Shop, GNC and Claire’s, increased by 7.7% over the corresponding 23 weeks in the previous year. Total retail sales grew by 6.3%, it said.

Group turnover increased by 10.0% to R32.3 billion in the 49 weeks to 9 August 2020.

Retail health and beauty sales increased by 8.7%. Health and beauty sales in comparable stores increased by 4.6% with volume growth of 2.6% as selling price inflation averaged 2.0% for the 49 weeks.

Total retail sales increased by 7.5% and by 3.9% in comparable stores, with selling price inflation of 2.2%.

Clicks said that it expects diluted headline earnings per share for the year ended August 2020 to increase by between 10% and 15%. It noted that the figure for 2019 was restated following the adoption of IFRS 16.

The growth in earnings is supported by the group’s tight cost management, continued working capital efficiency and the performance of United Pharmaceutical Distributors, which gained new contracts and traded strongly throughout the year.

Clicks said its directors plan to declare a full year dividend within its targeted dividend payout ratio of 60% – 65%.

Read: The new rules around pharmacy prescriptions in South Africa