Retail pharmacy Dis-Chem most likely sold lower volumes than in the prior period if one assumes price inflation was similar to that of Clicks, but it showed healthy growth in its wholesale division, which sells medicines to independent pharmacies.
Dis-Chem reported overall group revenue growth of 8.7%, while retail sales were up 7.5%, according to its update for the period September 1 2022 to February 5 2023. But like-for-like growth in existing stores, excluding Covid-19 vaccine income, was 4.4%.
Dis-Chem did not release price inflation figures, but rival Clicks saw average inflation of 6.8% in the 20 weeks to January 15. This suggests that if inflation was similar for Dis-Chem, it saw flat or lower sales growth in same stores.
“If the internal inflation Clicks reported is anything to go by, it would suggest that Dis-Chem’s volumes were negative,
said Sasfin analyst Alec Abraham.
Gryphon analyst Casparus Treurnicht agreed that Dis-Chem probably sold less in same stores than the prior period, with growth in sales explained by price hikes.
Mr Price, Pick n Pay’s grocery division and Ackermans all reported selling lower volumes over the festive season, excluding growth from new stores, than in corresponding periods in same stores as cash-strapped consumers cut back.
Treurnicht said he had not seen consumers under this much pressure in his career. “I also think that this is the start of a very long drawn-out slump [in retail sales]. We are not going to see figures that are going to shoot the lights out soon.”
Dis-Chem reported a 14.2% boost in beauty sales, which was expected because people no longer wear masks. Lipstick sales dropped during the pandemic, as did other cosmetics, due to the work-from-home trend, which has now been reversed.
Dispensary
Dis-Chem increased its medicine dispensary market share, saying it is SA’s largest retail pharmacy group in the category.
It also said trade returned to more normal patterns, with declining sales of vitamins, which were popular at the height of the pandemic. The company said more normal sales in medicines, cosmetics, nutrition and general health care resulted in an improvement in profit as these items have higher margins.
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 such as vitamin C and zinc supplements had been more frequently purchased by consumers during the [Covid-19] Omicron variant months of November 2021 to January 2022.”
Abraham said he thinks consumers are prioritising spending on basic food and groceries over supplements and vitamins. This is especially as basic foods prices have “increased substantially” in recent months.
Treurnicht said the update suggests Clicks is outperforming Dis-Chem. “Dis-Chem’s share is not particularly cheap, which makes it hard for me to believe that we will see any great upside in this share any time soon. It looks like Clicks is outperforming them.”
He also thinks Shoprite is taking market share from competitors, including Dis-Chem. Checkers has increased its range of personal and hair care products. “Prices are simply better at Shoprite or Checkers, so consumers buy as much as they can there and then do short satellite trips for hard-to-get items at pharmacies.”
Dis-Chem’s sales of baby-related items increased and it now owns 54 Baby City stores.
Dis-Chem’s wholesale business, which sells medicines to independent pharmacy groups and competes with Clicks UPD, reported growth in revenue and customers. Wholesale revenue increased 8.6% from the corresponding period, with sales to its own retail stores up 7%.
External wholesale revenue from sales to independent pharmacies increased 16.3%. That was attributable to a 6.6% rise in the number of customers, supplemented by greater support from existing ones.
The Local Choice (TLC) pharmacy franchise of pharmacies, owned by Dis-Chem, reported revenue growth of 21%. There are now 165 TLC franchise stores, an increase on 138 at the end of the corresponding period.
Dis-Chem shares closed 2.95% lower at R28.60 on Friday.
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