New Clicks Australia

Jeff Sher

New Clicks Australia – Review

• Shared service capability now in place

• Franchise skills developing

• Successful integration of Price Attack

• Formulated & started to roll out pharmacy model

• New management structure – ASF/OMF

• Restructured to meet future growth

• Leading the way in haircare, homeware & healthcare

New Clicks Australia – The new way

1. Selling of stores:

– Non-performers converted to Pharmacy

– Franchisees who do not meet compliance standards - managed

– Buying & selling now part of the business

– Not limited to Priceline

2. Profit centres:

– Marketing services

– Store development

New Clicks Australia – Behind the numbers

• One-off costs quite significant for pharmacy &

completion of Price Attack acquisition

• Anomalies in the House performance

• Pharmacy development

• Reallocation of costs to meet demands of

franchise business

Priceline - Snapshot

2003 2002

Sales A$’000

R’000

310 290

1 587 711

283 788

1 574 694

Sales growth % (A$)

% (R)

9.3

0.8

13.4

52.8

Comparable stores sales growth % (A$) 4.6 6.4

Operating profit before interest & before allocation of net costs of support structures

A$’000

R’000

24 424

124 974

21 943

121 758

Number of stores

Company owned 133 125

Number of full-time permanent employees 767 732

Weighted trading area m² 62 761 59 356

Net increase in trading area for the period % 5.7 6.3

Weighted annual sales per m² A$

R

4 930

25 226

4 393

24 376

Priceline Pharmacy - Snapshot

2003

Operating loss before interest & before allocation of net costs of support structures

A$’000

R’000

(397)

(2 029)

Number of stores

Franchised 7

Weighted trading area m² 2 999

Franchisee sales A$’m

R’000

5 329

27 263

Franchise fees A$’000

R’000

381

1 949

Priceline & Priceline Pharmacy

HIGHLIGHTS

• Appointment of Phillip Smith – brand leader

• Appointment of John Stapleton – merchandise head

• Restructure to meet demands of Pharmacy operations

• Repositioned in response to market

• 1.2m ClubCard members

• 15 new stores (7 pharmacies)

• Stock growth well below income growth

• Achieved good sales growth in tough market

Priceline & Priceline Pharmacy

KEY ACTION PLANS• Interlocking marketing

programme underpinned by “You Pay Less”

• Change to Priceline business model

• Changes to operational structure to deal with pharmacy

• Supplier relationships for middle shop product

• Investment in technology to cope with systems requirements

• Upgrade in security procedures

CHALLENGES• EDLP approach & Woolworths

aggression

• Pharmacy positioning

• Pharmacy supply chain

• Systems development

• Shrinkage

Priceline Pharmacy – Success factors

Conversions:

• Converting existing Priceline store (Prahran)

– Sales growing in excess of 40%

– Back & middle shop sales already at 18% - should double

• Converting existing pharmacy (Bentleigh)

– Script sales grown by 20%

– Front shop sales up from 10% to 75%

New site:

• Mornington

– Turnover A$45k per week from 300m²

– Front shop sales 50%

House - Snapshot

2003 2002

Operating profit before interest & before allocation of net costs of support structures

A$’000

R’000

2 257

11 548

2 301

12 768

Number of stores

Company owned

Franchised

1

90

-

82

Franchisee sales A$’m

R’m

89.6

459.5

68.5

380.1

Franchisee fees A$

R

3 632

18 584

2 949

16 363

House

HIGHLIGHTS• Brand Repositioning –

Inspirational Homewares• Appointment of Simon Dryden

& a restructured brand team • Developed a Local area

marketing approach• Developed strategic Supplier

relationships enhancements to other income to follow

• Achieved 23% growth in Franchise fees

• Won National Award for Retail Excellence

House

KEY ACTION PLANS• New marketing programme

& Pay-TV alliance• Redefine product

classification• Implementation of new

in-store positioning• Franchisee compliance • Upgraded receivables• Development of extranet &

enhancement to billing

CHALLENGES• Growth in competition• Sameness of product

• SARS – impact on import quantity

• Bad debts

Price Attack - Snapshot

2003

Operating profit before interest & before allocation of net costs of support structures

A$’000

R’000

3 518

17 999

Number of stores

Franchised 101

Franchisee sales A$’m

R’m

87.3

446.7

Store openings during the year 12

Price Attack

HIGHLIGHTS• Successful integration into

business• Resolved all franchise

agreements• Appointed Carmelo Francese as

the new brand leader• Resolved Master Franchisee in

Western Australia• Adopted a Marketing focus• Overcome supplier & franchisee

scepticism

Price Attack

CHALLENGES• Complexity of salon vs retail• Competition in Victoria• Transition from previous

culture• Private label acceptance

KEY ACTION PLANS• New store format• New customer

communication• Salon contract• Association with women’s

basketball• Local area marketing• Change of IT platform -

easier decision making

Shared Services

HIGHLIGHTS• Store development &

marketing services shift to nil cost

• Development of franchise skills

• JDA first phase completed• Developed an Integrated IT

pharmacy solution• Realigned costs from the

centre to brands

CHALLENGES• Moving from cost centre to

profit generation• Growth in staff numbers to

deal with franchise capability• Getting expense allocations

right with diversity of business models

• Office accommodation

New Clicks Australia – The year ahead

• Restructured – governance in place

• No additional funding required – store sale methodology

• Priceline positioning

• Store growth in pharmacy

• House marketing

• Price Attack – Victoria solution

• Systems development – Franchise

• Enhance capability – reduce costs