Specialist retailer Clicks is trading at 52-week lows in the aftermath of results. Over three years, the share price has returned just 4.7% — and that’s overall, not per year. Add in dividends and you get a total return of 14.4% — less than you would have got by just having your money in fixed-income investments!
This isn’t because the business is fundamentally broken. After all, we are talking about a group that boasts retail pharmacy market share of 24.9%. The results for the six months to February 2026 even reflected diluted headline earnings growth of 8.1%, which means that Clicks is generating growth well in excess of inflation.
One argument is that the problem is the valuation. But Clicks has always been expensive. I remember many debates on X and elsewhere over the past few years about the share price trading at such elevated multiples despite relatively slow growth.
Admittedly, the guided headline earnings growth for the year ending August 2026 of between 4% and 9% is particularly weak. Another point to note is that headline earnings for the interim period grew by only 6.4%, with the gap to headline earnings growth of 8.1% being closed through share buybacks. In a market that offers strong bond yields, slow-growing equity stories simply cannot support earnings multiples in the high 20s.
The issue isn’t just the fixed income and property alternatives for those looking for more defensive portfolios. There’s also an argument that investors are rotating from safety and quality towards riskier local names that are enjoying an upswing in conditions in South Africa.
It would need extensive shareholder register analysis to confirm or deny this thesis, but it does seem logical that Clicks would be relatively less appealing in a world where South African stocks with riskier business models are able to generate outsized growth in this cycle.
But is there perhaps more to this situation? What about the most important analysis of all in retail: performance vs competitors?
Dis-Chem is sounding like a growth company that is hungry for market share. In contrast, Clicks doesn’t seem as exciting
If there’s one thing we’ve learnt from the grocery sector, it’s that Ernest Hemingway’s bankruptcy story is relevant. Things change in two ways: gradually, then suddenly. For years, it looked like Pick n Pay was only slightly behind Shoprite. The gap then widened fast, with Shoprite pulling away and putting competitors (including Spar) under immense pressure. Today, it feels like Shoprite has always been the “obvious” best in the market, but it wasn’t obvious at all when the gap was just starting to open up.
Could we be seeing the same thing in categories like pharmacy and health and beauty?
The obvious competitor is Dis-Chem, where the founders have handed the reins to professional management. This is always a risk for investors, as brilliant retail founders are a rare breed. Many local retailers are run by accountants rather than seasoned retail experts. It can work, but it requires the right team around the CEO. At least Dis-Chem CEO Rui Morais has been in the business for a long time, so he’s no doubt picked up plenty of skills from the Saltzmans.
For now at least, Dis-Chem is telling an encouraging story. In the most recent trading update, which covered September 1 2025 to February 16 2026, it reported group revenue growth of 10.1%. Retail revenue increased by 9.5% and external wholesale revenue was up 13.7%. These are strong numbers. Results for the year ended February 2026 are due on May 29, so we will need to be patient to get the full picture.
In the meantime, there’s one thing about the Dis-Chem narrative worth highlighting: it sounds like a far more modern retailer. Clicks has an exceptional loyalty programme (perhaps the most iconic in the country), yet Dis-Chem is scoring the PR points with investors by talking about the power of data and integrations. By referencing strategic partnerships with the likes of Capitec, Dis-Chem is sounding like a growth company that is hungry for market share. In contrast, Clicks doesn’t seem as exciting.
The market is being inundated with stories of companies building platforms and ecosystems that go beyond their core business. Look no further than Pepkor’s recent capital markets day, where the retailer dedicated plenty of energy to talking about the bank it will be launching.
In a more positive South African environment, the spoils will go to companies that can tell great stories and back them up with decent numbers. Will Dis-Chem vs Clicks become Shoprite vs Pick n Pay?
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