When recession gets its grasping tentacles around the consumer’s wallet and starts to squeeze, it is obvious that said consumer must have a sharp look at his spending and start to prioritise. Fans of Curro will point out that school fees are particularly resilient, with parents enduring hardships galore to ensure that the fruits of their loins are given a decent start in life. Now shareholders in Clicks will be more than pleased to discover the somewhat counterintuitive news that the health and beauty sector is more than holding its own.
The rational consumer might take a view of the economic climate and decide to dial down on the anti-wrinkle cream, yet it seems that the Clicks faithful have decided that they may be on a fast track to debtors’ prison, but they will arrive there bursting with vitamins and exotic dietary supplements while their skin is glowing with the freshness that, 97% agree, is down to ladling on three varieties of slop.
The company does mention that customers are adjusting to the times by switching to Clicks private-label products, which has helped to grow margins, and it continues to invest in new stores and extensions of existing stores. A particularly strong performance came from its pharmaceutical distributor UPD, which continues to grow market share and increased operating profit by 27.2%. The group is expecting the trading environment to remain challenging and load-shedding to continue to erode consumer confidence, but it is taking advantage of the resilience of its business model to accelerate its expansion plans and continue to invest for the future.
No doubt the Germans have a glorious compound word for the act of "tempting fate by slagging off an aeroplane manufacturer while travelling north at 37,000ft in one of its comfortable 787s", but sadly I cannot Google it due to the woeful quality of Wi-Fi on British Airways.
And at least it is a 787 which boasts an impeccable safety record, rather than the 737 Max whose flight-control software appears to have caused two tragic crashes in the past six months with the loss of 346 lives.
Now there are about 350 of these planes grounded around the world, and Boeing is scrambling to provide a software fix for its MCAS system alongside appropriate pilot training on it, but even if it manages to get approval to get the fleet back in the air, passengers are unlikely to be hurrying back on board.
Meanwhile, Boeing will be facing compensation claims from the families of crash victims, the direct costs of fixing the fleet, potential claims from airlines as a result of the grounding, delayed delivery of the aircraft that are still being built and the possibility of airlines cancelling orders.
The 737 Max was the fastest-selling jet in Boeing’s history, contributing to a bumper year in 2018 when revenues topped $100bn for the first time, generating profits of $10bn. It ended the year with $8bn in cash, and may well need every cent of it if it can’t get the problems fixed pronto. Boeing will carry significant insurance coverage which will mitigate the immediate economic downside, but the loss of confidence in its reputation will be enormous.
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