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Group Strategy

Clicks Group’s strategy is to create sustainable long-term shareholder value through a retail-led health, beauty and wellness offering.

Strategic drivers of longer-term growth

1	Favourable market dynamics Healthcare markets are defensive and offer long-term growth opportunities in South Africa. Improving living standards, increasing urbanisation and longer life expectancy is contributing to a growing market for health and beauty products. An increasing proportion of the population is entering the private healthcare market. The increasing use of generic medicines will continue to make healthcare more affordable.
2	Capacity to expand retail footprint and pharmacy network The goal is to expand the Clicks store base in South Africa to 900 in the long term, with a pharmacy operating in every store. The retail pharmacy market share goal is 30% in the long term (currently 22.2%). Primary care clinics in 195 Clicks stores support the health service offering. The retail footprint is complemented by an online store to increase customer convenience and Clicks Direct Medicines provides a national direct-to-patient courier service.
3	Differentiated product offer Private label and exclusive brands offer differentiated ranges at higher margins. Clicks is a brand consumers trust implicitly and the brand has demonstrated its ability to transcend product categories and markets. The portfolio of exclusive franchise brands of The Body Shop, GNC, Sorbet and Claire’s augment Clicks’ private label brands in the health and beauty categories.
4	Ability to leverage customer loyalty Clicks ClubCard is one of the largest retail loyalty programmes in South Africa with 7 million active members. ClubCard offers customers attractive cashback rewards and a range of affinity partner benefits. Clicks has extensive opportunities to utilise ClubCard data analytics and marketing capability to increase the customer basket size and value, and frequency of shopping.
5	Opportunity to grow UPD UPD provides an efficient healthcare supply chain which supports the growth of the Clicks business. UPD offers national wholesale services to private hospitals and independent pharmacy, including Link pharmacies, as well as a distribution service to local and international pharmaceutical manufacturers based on price, quality control and speed to market. The growth opportunity for the business is supported by a goal of obtaining 30% shares of the fine wholesale and bulk distribution markets.

Strategic objectives

Vision: The customer’s first choice health and beauty retailer

Strategic objectives:

Deliver a competitive and differentiated product offer
Create a great customer experience in store
Drive customer loyalty through ClubCard
Grow the retail footprint
Ensure supply chain excellence
Motivated and effectively skilled staff

Vision: The leading healthcare supply chain partner in South Africa

Strategic objectives:

Grow market share
Protect income
Optimise efficiency
Build capacity

Medium-term financial targets	Current targets	Performance in 2017	Revised targets
Return on equity (%)	50 – 60	44.1	50 – 60
Return on assets (%)	14 – 18	14.0	14 – 18
Inventory days	60 – 65	65	60 – 65
Operating margin (%)
Group	6.0 – 7.0	6.8	6.5 – 7.5*
Retail	7.5 – 8.5	7.9	7.5 – 8.5
Distribution	2.0 – 2.5	2.7	2.2 – 2.7*
Dividend payout ratio (%)	n/a	60	60 – 65

* Targets increased


Long-term goals for clicks and upd
Clicks
Number of stores in South Africa	900
Retail pharmacy market share	30%
Private label and exclusive brands as a % of sales	25%
UPD
Fine wholesale market share	30%
Bulk distribution market share	30%