Dis-Chem trading update given a cold shoulder by the market

MARKETS gave Dis-Chem Pharmacies the cold shoulder and sent its share price lower on Friday after the pharmaceutical group reported revenue growth of 8.7% in a trading update and said that its diesel costs across its stores increased 54% over the past six months.

Its diesel bill came to R36m as it tried to mitigate load shedding in its stores.

South African companies are all feeling the fallout of an unprecedented period of load shedding in the country, which is adding to firms’ increasing costs.

Dis-Chem said: “The group’s strategic early investment in generator capacity has resulted in minimal disruption to its ability to trade.“

Dis-Chem shares closed on Friday at R28.60, 2.95% down. They have decreased by 21.04% in the past six months.

For the period September 1, 2022, to February 2023, Dis-Chem recorded group revenue growth, excluding vaccines and Covid-19-related lines, of 8.7% compared to the corresponding period in the prior year.

Like-for-like retail revenue growth was 4.4%.

This as Dis-Chem's main rival, Clicks, in its results for the 20 weeks to January 15, had reported a 12.2% increase in retail sales, excluding Covid-19 vaccinations. Clicks, reported like-for-like growth of 8.9%.

Dis-Chem CEO Ivan Saltzman said: “We continued to see shopping pattern normalisation during this period.

“This normalisation is particularly notable in the healthcare and nutrition category, where selected commoditised lines, like vitamin C and zinc, were more frequently shopped by consumers during the Omicron variant months between November 2021 and January 2022.

“Despite these changing consumer dynamics, Dis-Chem continues to maintain its healthcare and nutrition market share and market leadership position,” he said.

Dischem reported that retail revenue increased by 7.5%, excluding vaccines and Covid-19-related lines, for the period compared to the corresponding period.

“Including the base effect differential of R461 million attributable to vaccines and Covid-19 related lines, retail revenue increased by 3.2%, and group revenue increased by 4.7% for the period, compared to the corresponding period,” it said.

During the reported period, DisChem said it continued to increase its dispensary market share extending its position as South Africa’s largest retail pharmacy group, by dispensary market share. “The group experienced a strong recovery in the beauty category ahead of market recovery.

“The group continues to advance its ambitions in the baby category with steady improvement in baby-focused trade, specifically in Dis-Chem Baby City stores, highlighting the destination status of the brand,” it said.

During the period, the group added eight new Dis-Chem stores and four new Baby City stores to total 312 stores, comprising 258 Dis-Chem and 54 Baby City stores.

“The Baby Boom stores acquired on March 1, 2022, have all been rebranded to Dis-Chem Baby City,” the group said.