Allan Gray bought more shares in a company that has kissed R21.39 billion goodbye

Clicks’ shares are down 26.78% year to date, yet Allan Gray believes the company is now more interesting than it was 12 months ago.

The firm explained in a recent article that, while there are growing concerns about renewed competition, Clicks remains a good business.

Allan Gray equity analyst Rory Kutisker-Jacobson said Clicks’ significant share price drop is more a matter of a business being derated than of a broken business.

Clicks’ share price is down 26.78% in 2026 to date and down 37% from its peak in December 2024.

This means the retailer has seen its market capitalisation decline by R21.39 billion since the start of this year, with its shares now trading at R243.03.

“The company has yet to report results to the end of August 2026, but based on its half-year results to February 2026, turnover was still growing and headline earnings per share had risen by 8.1%,” Kutisker-Jacobson said.

“Yet the share fell more than 8% on the day the company announced its results, with the market unimpressed by full-year earnings guidance.”

Kutisker-Jacobson acknowledged growing market concerns about renewed competition from Dis-Chem and Shoprite, and the effect this could have on Clicks.

PSG Wealth wealth manager Schalk Louw told Daily Investor in August that Shoprite, in particular, poses strong competition to the incumbents, Dis-Chem and Clicks.

For decades, South Africa’s retail pharmacy sector was a two-player contest between Clicks and Dis-Chem.

However, this has now changed, with retailers such as Shoprite and Spar expanding into the sector and seeking to gain market share.

Louw said Shoprite already has the scale, customer reach, loyalty data, and delivery infrastructure to take on the retail pharmacy market.

Shoprite and its subsidiary, Checkers, can use these factors to their advantage to move further into the health, beauty, and pharmacy-related services markets that Clicks currently dominates.

Aside from Shoprite, Clicks’ main competitor, Dis-Chem, has also announced ambitious plans to overhaul its store network in a bid to take more market share.

In addition, Dis-Chem’s revamped loyalty programme could see the pharmacy retailer encroach on Clicks’ long-dominant Club Card programme.

Allan Gray’s view

Despite increased competition, Kutisker-Jacobson said Clicks’ share price performance “is less a story of a broken business than of a business being derated from an unusually rich multiple”. 

“Clicks traded at more than 30 times earnings for a long period, a rating that only holds up if growth stays exceptional,” he said. 

“Now trading at closer to 15 times earnings with a return on equity still comfortably above 30%, the stock screens far more interesting to us than it did 12 months ago.”

Kutisker-Jacobson said Allan Gray would rather own a good retailer after the market has “taken the froth out of the price” than pay for the same business when everyone agrees it is wonderful.

Clicks still has many advantages over its competitors, not least of which is its extensive physical footprint that spans 1,005 stores and pharmacies.

The group plans to expand this network to 1,200 stores over the next few years, with 50 new stores planned for the 2026 financial year.

Clicks’ loyalty programme also remains dominant in the retail pharmacy market, supported by partnerships with major brands such as Engen.

Louw told Daily Investor that, while Dis-Chem offers greater recovery and expansion potential, Clicks currently offers the stronger risk-adjusted proposition. 

“Its lower valuation, stronger recent earnings delivery, and lower reliance on successful execution of a large investment programme are why Clicks is my preferred investment at present,” he said.

Kutisker-Jacobson said Allan Gray has been buying Clicks and several other retailers, as the market has priced them as if the current squeeze on consumers is permanent rather than cyclical.