Dis-Chem sets new target as it opens 200th store

On Wednesday (3 November), retail pharmacy group Dis-Chem reported revenue growth of 16.6% to R14.9 billion for the six months ended August 2021 and a 35.3% increase in headline earnings per share (HEPS) to 48.7 cents per share.

Despite a challenging economic environment with the Covid-19 pandemic and the deepening economic recession, the business achieved positive results, continued to take market share in all categories and delivered strong cash generation.

Retail revenue grew by 16.0% to R13.2 billion, with comparable-store revenue at 6.8%. During the twelve months to August 2021, eighteen Dis-Chem and three Baby City stores were opened, resulting in 199 Dis-Chem and 35 Baby City stores by August 2021.

Together with the Baby City stores acquired on 1 January 2021, these stores contributed R822 million to revenue. The group opened its landmark 200th Dis-Chem store in October.

Dis-Chem reported an operating profit up 24.8% to R758 million and declared a dividend of 19.5 cents per share.

“We have produced an excellent set of interim results, with strong revenue growth driving market share gains across all categories and strong cash generation, notwithstanding the pressure that the pandemic continues to place on the South African consumer,” said Ivan Saltzman, chief executive officer of Dis-Chem.

“The sales of lower margin Covid related products, which were brought in earlier in the pandemic and have been decreasing in price, increased disproportionately during and after the second and third waves of infections. This has resulted in transactional gross margin lagging sales growth over the corresponding period,” he said.

Retail revenue grew by 16% to R13.2 billion, with comparable-store revenue at 6.8%. Dis-Chem’s wholesale revenue increased by 17.3% to R10.9 billion. Wholesale total income grew by 11%, with the wholesale margin now at 7.5%.

Dis-Chem said that while online sales continue to be strong, its earlier rapid growth driven by the periods of hard lockdown has inevitably slowed, as expected. During this reporting period, online revenue grew by 18.1%.

Saltzman noted that the Baby City business is now fully integrated into the group, with management continuing to focus on unlocking the planned synergistic benefits.

“Consistent with our strategy of having at least one primary healthcare clinic in every Dis-Chem store, we have commenced the rollout of moms and baby-focused clinics across our Baby City store network.

“Both the Medicare and Kaelo acquisitions were concluded after the reporting period, and we are excited about the growth opportunities and new market potential that both acquisitions bring to the group.”

Dis-Chem said it supports the national response to the Covid-19 pandemic by operating a national vaccination site network comprising mass and in-store clinic sites. During the period under review, Dis-Chem administered 405,000 vaccine doses, with that number increasing to 860,000 doses by the end of October.

Looking forward, Saltzman noted that after the reporting period for the two months to 31 October 2021, Group revenue grew by 19.2% over the prior comparable period.

Dis-Chem has several strategies in play that auger well for future growth in addition to its organic growth, he said. The group will open seven new Dis-Chem stores in the second half of the financial year and plans on maintaining its cadence of approximately 20 new store openings in the 2023 financial year.

Saltzman expressed management’s confidence about the synergistic characteristics of the recently concluded acquisitions. “The integration and rebranding of approximately 40 Medicare stores will accelerate the expansion of our store network, enabling us to attract more customers, in new geographies, to our unique shopper experience.”

Notwithstanding Dis-Chem’s growth strategies and the resilient nature of the markets in which the group operates, it believes that consumers in the broader economy will continue to experience financial constraints in the medium term.


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Dis-Chem sets new target as it opens 200th store