Finance Ghost: Is the latest Clicks rally a dead cat bounce or a change in trajectory?

The most recent set of financial results released by Clicks covered the six months to 28 February 2026. This makes them quite outdated now, with full-year numbers expected to be released in October. But the share price has seen plenty of action despite the stale numbers, having rallied more than 13.5% in the past 7 days(1).

The important context is that the share price is still down more than 37% year-to-date(1). If we zoom out, the current share price of around R211 is a long way off the peaks of roughly R400 reached in late 2024 and again in April 2025.

The share price may have nearly halved from those peaks, but the group isn’t making only half the profits that it used to generate. This isn’t a case of the earnings collapsing and the multiples staying constant.

No, this is a classic example of multiple compressions, with the Clicks valuation dropping considerably in response to a variety of inputs, not least of all, a meaningful slowdown in HEPS growth.

Is the latest rally just a dead cat bounce? Or has Clicks finally found a bottom ahead of the release of full-year results next month?

Where did the mid-teens HEPS growth go?

The share price was already under pressure before the release of interim results back in April, but that negative momentum accelerated as the market digested the numbers.

One of the reasons was the extent to which HEPS growth slowed down. In the prior two interim periods (H1’24 and H1’25), Clicks grew HEPS by 13.2% and 14.5%, respectively. But in H1’26, they could only manage 8.1%.

It’s not that earnings fell. It’s that the growth rate was much lower than in comparable periods. It’s likely that this was a significant contributor to the decline in the Price/Earnings (P/E) multiple from the high-20s/early-30s(2) in recent years to the current level of 14.6x.

Not a competitive vacuum

The very first comment in the analyst presentation was that Clicks found itself in a “tough trading environment(3).” The numbers supported this assertion, as comparable stores’ turnover growth was only 3.1%, driven by inflation at 2.3% and volume growth of just 0.8%.

Management attributed part of the slowdown to the implementation of a new warehouse system that affected product availability in key regions. That was helpful fodder for media headlines, but a deeper look at the retail categories tells a more interesting story.

The Pharmacy category contributed 26.4% of turnover, with 8.6% growth, making it the fastest-growing category in the group. But due to regulated pricing and the cost of having pharmacists in the store, it’s an accepted reality in retail that the Pharmacy category is better at driving footfall than overall profitability.

The largest contributor is actually Beauty and Personal Care, with a 33.8% contribution and 5.8% growth for the period. We know that Woolworths and other names have been investing heavily in the beauty category as a source of margin and differentiation in a crowded apparel market. The Clicks category offering is broader than at many of these competitors, but they are still facing increased competition overall.

The third largest category is Front Shop Health & Baby, contributing 24.7% of turnover after growing just 3.1%. There are challenging headwinds here, including the pressure on the birth rate among higher-LSM consumers and the disruption from online shopping options at grocery stores competing in similar categories.

Put simply, you can buy your nappies with your bread and milk through a single transaction at a grocery store – and get it delivered to your house within 60 minutes. That wasn’t the case just a few years ago.

The General Merchandise category is now only 15.1% of sales, having grown just 2.9% (the slowest rate of all the categories at Clicks). This is cause for concern, as general merchandise traditionally carries strong gross margins, particularly when there’s a solid private label strategy. Clicks has enjoyed a leading position in elements of this category for many years, but eCommerce adoption has created new competitors in this space.

A highly promotional environment

South Africa is known to be a retail market that has highly price sensitive consumers. Promotional sales (i.e. sales at less than full price) are critical to any retail offering in this country.

This was clearly visible at Clicks in the latest period, as promotional sales grew 8.1% and contributed 47.8% of turnover for the period. This puts strain on the gross margin, forcing retailers to find ways to protect it through efficiencies, volume growth and product mix strategies.

Speaking of mix, one of the most important weapons in a retailer’s arsenal is private label products. This is an area where Clicks has historically been strong. Private label products typically have higher gross margins than branded products, allowing retailers to be more competitive on pricing and address the customer need for promotions on the shelves.

In the latest period, private labels contributed 31.3% of front shop sales and 12.6% of pharmacy sales. That’s a total contribution of 26.5% to sales –- a metric that investors will likely keep an eye on.

Digital opportunities

Although there’s an argument to be made that Clicks has found things more difficult in an eCommerce-heavy period, there’s also the potential for Clicks to get things right digitally.

It has 12.9 million active ClubCard members who account for 83.7% of sales, providing a strong data underpin to drive customised rewards. Online sales were up 17.9% in the latest period, well ahead of total sales growth. And with more than 1 000 stores (of which over 800 have pharmacies), Clicks has broad distribution that lends itself well to an omnichannel model.

But the difficult question is around the trusted relationship between customers and their pharmacists. This has historically driven footfall in stores and sales in adjacent front shop categories, and could be the Achilles’ heel in the modern era of retail. As for Clicks, to make omnichannel work, they would need to achieve strong adoption of online pharmacy sales bundled with other categories.

Put differently, consumers don’t need a high level of trust with Checkers to order milk and to add nappies and shampoo to the online order. But to replace milk with medicine and use that as the catalyst for an online order requires a much higher level of trust and underlying compliance processes around prescriptions.

The opportunity is there, but it was arguably a lot easier to drive front-shop sales via footfall rather than online sales.

Don’t forget the wholesale business

UPD, the distribution business in the group, contributed around 34% of turnover and 11.3% of income in the latest period (before adjusting for intragroup transactions). It’s a lower margin business than retail, but still an important one as it allows Clicks to sell to independent pharmacies and participate in that value chain.

There were concerns here in the latest period as well, with market share slipping from 26.6% to 25.7%. Managed turnover dipped 0.2% due to the loss of two bulk contracts.

The wholesale business isn’t the most important driver of value at Clicks, but it’s big enough that these concerns will be looked at by the market.

Looking ahead

With full year numbers expected to be released in the next month or so, the market will pay close attention to how Clicks performed in the second half of the year.

The guidance after the interim period was for full-year growth of between 4% and 9% in diluted HEPS, so management wasn’t expecting to get back to double-digit growth.

The share price pressure has been a function of many factors including lower growth, concerns around competition and the vulnerable state of South African consumers. In the past few months, we’ve seen very high fuel prices added to that fire. We’ve also seen other retailers achieve strong growth in online channels and in categories like beauty, so there’s an  argument to be made that the competitive environment got worse rather than better.

Will Clicks meet the guidance given to the market? Will they underperform, or perhaps outperform? We will only find out in October. In the meantime, investors need to consider many angles, including whether the substantial derating in the multiple is justified in the context of the slowdown in growth.

Disclosure: The Finance Ghost does not hold a position in Clicks at the time of writing. BROKSTOCK, its employees, representatives or related parties may hold positions in the financial instruments discussed. 

(1) Moneyweb, 23 September 2026

(2) TIKR data

(3) Financial and operational statistics all sourced from the Clicks results for the six months to 28 February 2026

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