Clicks Group share price in the wake of recent controversy
In this article we take a look at The Clicks Group in the wake of recent controversy, including how retail and institutional investors currently view the share as well as a shorter term trading view for the company.
Who are The Clicks Group?
The Clicks Group remains a leader in the healthcare market where the company has an 24.6% share of the retail pharmacy industry and a 27.2% share of the private pharmaceutical wholesale market.
The Clicks Group brands include Clicks, Musica, The Body Shop, GNC and Claire’s. Together these market-leading brands have a combined footprint of over 829 stores in South Africa, as well as 51 stores across neighbouring countries Namibia, Botswana, Swaziland and Lesotho.
Clicks controversy
A recent advert by TRESemmé, a Unilever Plc brand, hosted on the Clicks website has caused some negative sentiment towards the company. The advert showed an image of African hair, described as "dry and damaged", contrasted against an example of white hair which was referred to as "fine and flat", inciting anger and calls of racism towards the company.
Clicks remedial action has seen two employees suspended on the grounds of negligence and the company issue a public apology on the matter. The Clicks Group has also said that it will remove TRESemmé products from it shelves in leiu of the matter.
In an initial response to the advert, demonstrators damaged seven Clicks Group's stores, forcing many others to close on the day of the protest. Demonstrations were lead by the Economic Freedom Fighters (EFF) political party. Clicks has since been awarded an interdict against the party which is to stop further incidents from taking place at its stores.
Click results and fundamentals
In the 23-week period starting from the 1st of March 2020, group turnover increased by 10% against the prior year’s comparative period. The group expects diluted headline earnings per share for the year ending 31 August 2020 to increase by between 10% and 15%.
The Clicks group currently trades on a relatively high Price to Earnings (P/E) multiple of 33x, while also having offered a modest 1.6% historical dividend yield.
Broker ratings and client sentiment
A Thomson Reuters poll of 7 analysts arrive at an average long term of ‘Sell’ for the Clicks Group as of the 10th of September 2020.
67% of IG Clients with open positions on the Clicks Group, as of the 10th of September 2020 expect the price to fall, while 33% of IG clients with open positions expect the price to fall.
Technical /Traders view
The share price of the Clicks Group remains in a consolidation over the medium term. In the short term we are seeing a bullish move out of oversold territory. Traders who are long may look to the 25300 resistance level as a near term target, while a close below the near term low at 22550 would consider the failure of the bullish assumptions.
In summary
- The share price of Clicks has started to recover from the recent controversy surrounding the online advert deemed ‘racist’ by some
- Clicks has seen 7 of its stores damaged as a results of recent protest action
- The group has a court interdict against future protests of this nature
- A recent trading update see’s the company as resilient over the lockdown period having grown both revenue and earnings
- Short term valuations appear high for the stock
- IG clients with open positions on Clicks are net short
- The average long term broker rating for the share is ‘sell’
- The share price is currently rebounding out of oversold territory with 25300 a near term resistance target
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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