Dis-Chem points to different trading patterns during Covid-19

 ·20 May 2020

Pharmacy group Dis-Chem says it has experienced different trading patterns to that of corresponding years,due to the Covid-19 pandemic.

It said that forecasting future earnings is difficult, as it will depend heavily on the duration of the lockdown levels and the normalisation of retail trade.

The group published consolidated results for the twelve months ended 29 February, showing revenue growth of 12% to R24 billion. Retail revenue grew by 11% to R21.8 billion with comparable store revenue at 4%, it said.

Operating profit however, contracted 9.3% to R1.25 billion, and diluted headline earnings per share dropped to 69.6 cents per share, from 83.6 cents before.

The group said it restricted selling price inflation to 2.2% thereby achieving positive volume growth despite the difficult economic climate.

Dis-Chem opened 18 new stores and acquired 3 new pharmacies from the corresponding period resulting in 170 stores at February 2020. These new stores contributed R656 million to revenue, including R165 million from the acquisition of Springbok Pharmacy on 1 April 2019.

Wholesale revenue grew by 14% to R16.6 billion. “Revenue to our own retail stores, still the biggest contributor to wholesale revenue, grew by 12.8% while external revenue grew by 23.3% from the corresponding period,” Dis-Chem said.

It said that with the on-going Covid-19 pandemic and the uncertainty around how quickly South Africa will transition through the new stage-based plan announced by the government, it has been decided to preserve cash resources.

“The dividend payment will be deferred until the next dividend cycle once the Group better understands normalised trading conditions and considers the funding sources for the Baby City transaction,” it said.

Dis-Chem said earlier in May that it is buying the baby care products retailer from its founder shareholders, the Aronoff family, for R430 million.

Buying patterns

After year end, Dis-Chem pointed to different trading patterns as a result of the Covid-19 pandemic, and resulting lockdown.

During March, before the lock down came into effect on 27 March 2020, retail stores experienced a substantial increase in revenue compared to the corresponding period of 45.6% as customers stocked up on products.

Increased revenue were seen across all categories but especially in the pharmacy, healthcare and nutrition category, the pharmacy group said.

“This trading pattern was then reversed during the lock down, when only essential products could be sold, and retail revenue decreased by 20.9% compared to the corresponding period. Since level 4 came into effect the Group is starting to see a recovery in its revenue with retail revenue increasing by 2.8% from 1 May until 16 May 2020 compared to the corresponding period.”

Dis-Chem said that for the eleven weeks to 16 May 2020, retail revenue grew by 6.2% and wholesale revenue grew by 25% from the corresponding period.

“The wholesale business benefited from the resilient nature of independent pharmacy with pharmacy, healthcare and nutrition revenue growing both prior to and during the Covid-19 period.

“In addition a business to business solution was developed, offering all businesses returning back the ability to access the appropriated products (PPE, sanitation products) and services (screening and testing services offered by our clinic sisters) at wholesale prices,” it said.

Future uncertain

Dis-Chem said that the ultimate impact on trade in the 2021 financial year is currently unknown, as it will depend heavily on the duration of the lockdown levels and the normalisation of retail trade. Provisional Reviewed Annual Condensed Consolidated Resultsfor the twelve months ended 29 February

The group said it continues to report revenue  growth ahead of market growth, as it grows space and benefits from a maturing store base. “As a result, the group has improved its market shares across all core categories,” it said.

Dis-Chem said that it has paid 83% of April rentals, representing the essential portion of the rental amount, and full payments continued from May.

“The ultimate impact on trade in the 2021 financial year is currently unknown, as it will depend heavily on the duration of the lock down levels and the normalisation of retail trade.

“The group is continuing to adapt quickly to the current environment, with a focus on mitigating the near-term impact whilst positioning itself for success in the future,” Dis-Chem said.

Read: Dis-Chem is buying Baby City for R430 million

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