new clicks south africa trevor honneysett
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New Clicks South Africa
Trevor Honneysett
New Clicks South Africa – Review of the year
• Deregulation of pharmacy now a reality
• Lifestyle category in transition …
• … significant steps taken to address this
• “You Pay Less at Clicks” is back
• Benefits of UPD acquisition
• Improving performance from Discom
• PM&A performance improving as we move to integration
• Stock turn improvements not sustained
Clicks - Snapshot
2003 2002
Sales R’000 2 997 226 2 692 620
Sales growth % 11.3 15.4
Comparable store sales growth % 7.1
Operating profit before interest & after allocation of net costs of support structures R’000 259 281 262 974
Number of stores
Company owned
Franchised
260
14
248
13
Number of full-time permanent employees * 3 552 2 865
Weighted trading area m² 140 099 133 864
Net increase in trading area for the period % 4.7 5.4
Weighted annual sales per m² R 21 394 20 115
* During the year, a number of part-time employees became full-time employees, in terms of
the new Labour Relations Act
Clicks
HIGHLIGHTS
• Pharmacy now a reality• PM&A integration started• PM&A showing ongoing improvement• Brand decision for pharmacy taken –
Clicks• Focused leadership team• Integrated merchandising team• FMCG & Beauty continue
to do well
2002
43%
57%
2003
40%
60%
Lifestyle
Health &Beauty
Clicks turnover growth
R’m 2003 % increase
Lifestyle 1 203 4.0
Health & Beauty 1 794 18.3
2 997 11.3
Clicks
KEY ACTION PLANS• New core homeware range• Value proposition• Store presentation• “Expect to pay less”• Basket checks vs competitors• Promotions• Reduce operating costs• Greeters & aisle walkers• Focus on top 50 stores• Dedicated staff for home & beauty• Merchandising solution –
clustering & ranging
CHALLENGES• Reverse decline in homewares
• Price competitiveness
• Entire customer experience• In-store look & feel
• In stock position
Pharmacy
HIGHLIGHTS
• Multifunctional, implementation team set up
• Key legislation in place• Product & pricing benefits
through UPD• Better buying discipline• Centralised pricing• Reduced staff costs
• Improved shrinkage• Professional training• Disease management• Promotions
Pharmacy integration project
PROGRESS:
• Preparation work well underway
– Marketing, IT, Operations, OD, Category, Store development, Finance,
Legal, Change management
• Pilot store (Glengariff PM&A) -> Clicks Pharmacy on 3 Nov as a JV
• Planning to convert 4 other PM&A pharmacies in 2003
• First conversion of a newly opened Clicks store to JV Clicks Pharmacy
format in 2003
• For 2004:
– Other PM&A stores to convert
– Up to 17 new Clicks stores with Pharmacy
– Up to 40 Clicks refurbs with pharmacy
Pharmacy
KEY ACTION PLANS• Integration into Clicks• Category management/buying• In store promotions• Generic substitution• Phase-out of LinkMax• Focus on ICU stores• Integration of IT platform
• Medical aids• Build relationships with doctors• Sustain relationship with
government
CHALLENGES
• Sales & profit growth• Stock turn too slow
• Integration of pharmacy systems
• Relationship with funders • Relationship with doctors
Legal - Competitions Commission, pharmacy licenses,de-link, lease, JV, finance structure
Finance - Integrating 2 systems, debtors, feasibilities(new pharmacies, new partners), budgets
Store development - look and feel, low cost model,property issues
Operations - Operational structures, SOP’s, storeconversion procedures, training
OD/HR - Conditions of service, induction, performancedevelopment program, organizational development
Change Management - Leadership, interfacing,communication
Category - Ranging ‘new formats’, understanding ‘newproducts’
Marketing - Market offering around service, value,convenience and ClubCard. Signage, uniforms
IT - Development store systems, development hostsystems, testing. Ideal to follow
September October November December
Glengariff
13 3
BalfourPark
Rosebank
Atterbury
West CoastVillage
To follow next year: 75 other PM&A’s, Approximately 50 pharmacist enquiries,17 New Clicks Stores, 40 Clicks refurbs
Edgemead
20
27
4
9
9
Preparation/Ground Work Pharmacy Opening Schedule
UPD - Snapshot
2003
Sales R’000 1 431 304
Operating profit before interest & after allocation of net costs of support structures R’000 54 304
Inventory turn 10.9
Debtors days 30.4
Number of full-time permanent employees 576
UPD
HIGHLIGHTS
• Acquisition smoothly integrated
• Growth in turnover from PM&A
& independent pharmacies
• Retained most independent
pharmacy customers
• Clicks pricing on top FMCG lines
available to wider customer base
• Standardised terms on FMCG suppliers
• Solid profit performance enhanced by sound working capital
& cost management
UPD
CHALLENGES• Two franchise models in the
group• Increase turnover from Link
• Continue to add value to third party customers
KEY ACTION PLANS• Simplify Multicare offering
• Develop Link offering as premium banner
• Develop programmes to enhance Link pharmacy loyalty to UPD
• Concentrate on bringing Clicks pricing to wider customer base
Discom - Snapshot
2003 2002
Sales R’000 771 441 720 895
Sales growth % 7.0 12.1
Comparable store sales growth % 8.7
Operating loss before interest & after allocation of net costs of support structures R’000 (5 571) (20 637)
Number of stores
Company owned
Franchised
177
1
180
2
Number of full-time permanent employees 1 335 1 298
Weighted trading area m² 49 351 51 821
Net increase in trading area for the period % (4.8) 8.6
Weighted annual sales per m² R 15 632 13 911
Discom
HIGHLIGHTS
• Ongoing differentiation from Clicks
• Three hair salons opened
• Strong growth in ‘dry hair’ market
• Introduction of private label
• Bolstered leadership team
• Dedicated category leadership
Discom
KEY ACTION PLANS
• Improvement in lifestyle – currently
being evidenced
• Entrench dominant position in African
beauty & hair care
• Improve margin through a stronger
lifestyle & import programme
• Procure new store locations
• Implement POSware platform
& merchandise planning
CHALLENGES
• Decline in homewares business
• Return to profitability
Music Division - Snapshot
2003 2002
Sales R’000 482 287 439 333
Sales growth % 9.8 24.9
Comparable store sales growth % 9.6
Operating profit before interest & after allocation of net costs of support structures R’000 25 675 21 470
Number of stores
Company owned 138 135
Number of full-time permanent employees 545 496
Weighted trading area m² 17 134 16 154
Net increase in trading area for the period % 6.1 10.9
Weighted annual sales per m² R 28 148 27 197
Music Division
HIGHLIGHTS
• Market share growth despite
slowdown in national music sales
• Strong growth in DVD sales
• Popularity of local artists
• Major growth opportunity in
gaming & DVD
Music Division
KEY ACTION PLANS
• Repositioning from music to
broader entertainment products
– 70 stores by December
– Branded lifestyle accessory
range
• POSware retail store system
implemented by March 2004
• Major marketing drive for
Christmas
• Store plans: 7 new stores, 7 stores
relocated / revamped
CHALLENGES
• Maturity of CD format
• Global decline in CD sales
• Piracy & downloads
• Shrinkage
• Eliminating redundant stock
The Body Shop - Snapshot
2003 2002
Sales R’000 45 781 27 161
Sales growth % 68.6 -
Operating profit before interest & after allocation of net costs of support structures R’000 10 017 5 176
Number of stores
Company owned 18 11
Number of full-time permanent employees 75 69
Weighted trading area m² 942 344
Net increase in trading area for the period % 173.8 -
Weighted annual sales per m² R 48 600 -
The Body Shop
HIGHLIGHTS
• Strong sales growth
• Increased number of stores
nationally to 18
• Stock turn improves to 5.8
• Piloted first Body Shop in a
Clicks store - Tableview
The Body Shop
CHALLENGES• Slower than expected take
off of new stores in suburban areas
• Novelty factor of the brand wearing off
KEY ACTION PLANS• Catalogue mailings &
promotions programme• Focus on Christmas gifting -
accounts for 25% of sales• Opening five new stores• Four new concept stores
planned in Clicks stores
Supply Chain - what have we learned ?
• Expectations of stock turns 5x, 6x, 7x when Centralised
Distribution introduced
• Not achieving this - questions Centralised Distribution
• What we have learned :
– Previously focused on Supply side of Supply Chain i.e. DC’s
– Need to focus on Demand side of supply chain - category,
planning, promotions, replenishment & data integrity
Shared Services
DC efficiency improvements
R2.16
2.60% 2.93%
1.47%1.23%
R2.67
0.45%
57%66%
0.64%
19.53% 6.70%Group expenses vs transfer growth
Clicks/Discom cost to transfer
Clicks/Discom cost per shipper
Group cartage costs
Volume centralised
DC wastage
2002 2003
1
Demand Supply
MF/ SUP = Manufacturer/ Supplier 3rd P = 3rd Party Distributors POMS = Purchase Order Mngmnt System DC’s = Distribution Centres CAT = Category MER = Merchandising OPS = Operations CUST. = Customer
MF/ SUP
3rd P
POMS
DC’s
CAT
MER
OPS
CUST.
Investment needed now !
Supply chain ‘pipe’
Supply chain – ‘demand’ side
• Address physical store layout, merchandise
promotion, ranging
• Implemented merchandise planning from JDA for
lifestyle category
• Benefits already evident
New Clicks South Africa – The year ahead
• Roll-out & bedding down of pharmacies
• Continued focus on Lifestyle category
• Implementation of financial systems to improve speed &
quality of information
• Focus on stock distribution & management systems
• Continued focus on expense control – alignment of size of
shared services platform to the business
Summary of year ahead
• SA & Australia managed autonomously
• Pharmacy proving itself in Australia – expanded opportunity for growth
• Australia well positioned in a competitive market
• Pharmacy implementation in SA
• Emergence of Clicks as a pre-eminent healthcare brand
• UPD integral to healthcare plans
• Ongoing turnaround in Discom
• Continued focus on improvement of stock turns
Questions ?
Thank You
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