Dis-Chem’s success formula delivers 10% increase in revenue
DIS-CHEM reported a 10 percent increase in revenue to R10.3 billion for the 22-week period from September 1, 2019, to February 2 this year, driven by opening more stores and its low price strategy despite a subdued economy.
Chief executive Ivan Saltzman said the weak macroeconomic environment in South Africa was unsupportive of business as constrained consumers continued to trade down resulting in smaller basket sizes.
“Our pharmacy focus, everyday low price strategy coupled with focused promotional campaigns and availability of choice for our customers enable us to drive strong footfall into our stores, this despite the negative impact of load shedding,” Saltzman said.
In spite of the positive trading update, its share price declined by more than 5 percent on the JSE. The share slid to R22.54 a share, down from Tuesday’s closing price of R24, then closed 1.88 percent lower at R23.55 on the JSE yesterday.
Saltzman said Dis-Chem’s increased focus on return on invested capital continued to deliver strong results with improved trade terms from their suppliers as well as more efficient inventory levels.
“Inventory levels are approximately R4.45bn, R650 million lower than at our 2019 financial year-end.
We expect a slight increase by year-end as a result of return enhancing buy-ins ahead of the gazetted single exit price (SEP) increase,” he said.
Dis-Chem’s retail division reported a 9.2 percent increase in revenue to R9.4bn and the group continued to gain market share in core categories.
Comparable store revenue growth and selling price inflation were 2.1 and 1.2 percent respectively.
“These numbers continue to be impacted by a constrained consumer and very competitive pricing across all categories. We welcome the recently gazetted SEP increase of 4.53 percent,” the group said.
Dis-Chem added 12 new stores during the period and they contributed R145m to revenue. Its wholesale revenue shot-up by 18.3 percent to R7.1bn and sales to their retail stores increased by 18.2 percent.
The group said sales to external customers, The Local Choice, and to independent pharmacies grew by 30.7 and 14.9 percent, respectively.