Wrap Text
Trading Update for the 24 weeks ended 15 August 2020
Dis-Chem Pharmacies Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/009766/06)
JSE share code: DCP ISIN: ZAE000227831
(“Dis-Chem” or the “Group”)
TRADING UPDATE FOR THE 24 WEEKS ENDED 15 AUGUST 2020
The following trading update aims to provide understanding into the Group’s trading performance
amidst the backdrop of the COVID-19 pandemic together with its challenges and brought on
regulations.
GROUP
During the 24 weeks from 1 March 2020 to 15 August 2020, the Group recorded revenue growth of
8.8% to R11.7bn over the corresponding period in the prior year (“Corresponding Period”).
Chief executive Ivan Saltzman: “Over the past four and a half months, Dis-Chem played a vital role
as one of the country’s essential service operators, supplying its customers with the necessary
medicines and other products during the nationwide lockdown. Despite the negative factors that
constrained regular trading, we remained committed to meeting the needs and demands of our
customers.
We continue to benefit from the resilient nature of the industry in which we operate and are
encouraged by elements of the changing healthcare landscape that highlight the importance of our
core dispensary and clinic offerings. We are excited about the growth we have seen in our clinics,
which together with our Telemedicine offering, will play an important role in the delivery and
growth of the primary care market within South Africa’s healthcare system.
We experienced disruptions to trade through store closures following positive COVID-19 cases
among employees where we followed strict protocols to test staff members, disinfect stores and
create a safe environment for our employees and customers. The Group continues to maintain the
highest possible standards of hygiene and safety.”
RETAIL
Retail revenue increased by 6.3% to R10.4bn over the Corresponding Period. Comparable sales
growth was 1.5%.
Despite the Group being an essential service provider and trading throughout the lockdown period,
the various COVID-19 regulations implemented during the different levels of lockdown restricted the
Group from selling all its products and trading within its usual operating hours. During level 5 of the
lockdown period, the Group was unable to sell 20% of its products, including higher-margin products
from its Beauty category. Lost revenue as a result of the restriction was approximately R200 million
for April.
The various restrictions during each level of lockdown dramatically changed the shopping behaviour
of our customers. Fashion and entertainment are the biggest drivers of footfall in malls. As such, the
location of our stores in convenience centres vs malls played a vital role in the composition of
turnover growth. The Group is amply represented in malls, thus the trend across the different levels
of lockdown (See table 1).
Table 1: Breakdown of retail sales and like-for-like sales growth in convenience centres and malls
during the various levels of lockdown
Sales growth (%) Pre-lockdown Level 5 Level 4 Level 3 Total
1 March 2020 – 26 March 2020 27 March 2020 – 30 April 1 May 2020 – 31 May 2020 1 June 2020 – 15 August
2020 2020
Convenience centres 58.3 (8.6) 9.7 17.2 16.4
Malls 29.0 (38.1) (11.1) (5.0) (7.8)
Total 45.6 (20.9) 1.0 8.0 6.3
Online sales growth 375 262 387 404 344
Like-for-like sales Pre-lockdown Level 5 Level 4 Level 3 Total
1 March 2020 – 26 March 2020 27 March 2020 – 30 April 1 May 2020 – 31 May 2020 1 June 2020 – 15 August
growth (%) 2020 2020
Convenience centres 46.3 (15.0) 2.8 8.8 8.3
Malls 28.4 (38.4) (11.2) (4.9) (7.9)
Total 38.6 (24.9) (3.0) 3.1 1.5
The Group experienced significant online sales growth of 344%. The quick deployment of additional
hubs together with an investment in the Group’s e-commerce platform enabled it to meet the
increased demand as best as possible. COVID-19 has matured the e-commerce environment and
consumer adaption by 3 to 5 years.
Retail categories
The Group experienced a change in its sales and gross margin mix due to sales restrictions during
level 5 of lockdown, with the sales of lower margin COVID-19 related products increasing and
reduced impulse purchases because of lower foot traffic. COVID-19 related products represented
approximately 9% of total retail sales and 13.8% of front shop sales. The Group is slowly starting to
see the sales and gross margin mix normalise.
As a result of social distancing, increased sanitising measures, people working from home and
children not going to school, the country experienced fewer cold and flu cases than in previous
years. This adversely impacted the dispensary category, specifically over the counter (“OTC”) sales.
Strong chronic drug adherence due to health education, awareness and higher patient risk, partially
offset the impact.
Non-essential product sales restrictions hurt our higher-margin Beauty category sales with two of
our biggest promotions, Beauty Fair and Mother’s Day falling within the lockdown period. This
category was also impacted by our large flagship stores located in malls, trading down. The Group
did not experience the commonly expected “Lipstick Effect”, demonstrating the change in the social
behaviour of consumers.
Healthcare and Nutrition performed exceptionally well as customers increased their spend on
vitamins and immune boosters. Sports supplement sales within the category declined vs the
corresponding period as a result of the closing of gyms and cancelling of sporting events. The Group,
however, believes that Healthcare and Nutrition will continue to take an additional share of
customers wallets as a result of improved health education and awareness in light of the pandemic.
In the Baby category, the Group experienced pre-lockdown stocking up, adversely affecting sales
during the lockdown period. Expecting mothers were the most cautious shoppers, which contributed
to both the decline in in-store purchases and the exponential online sales growth in this category.
Table 2: Category sales growth
% sales growth
Dispensary 1.9%
Personal Care and Beauty 4.8%
Healthcare and Nutrition 19.0%
Baby -2.6%
Other 2.4%
To date, the Group has added 11 new stores.
WHOLESALE
Wholesale revenue increased by 16.4% to R8.6bn. Sales to our retail stores, which contribute 84% of
wholesale revenue, grew by 13.8%. Sales to independent pharmacies and The Local Choice (“TLC”)
franchisees increased by 39.9% and 27.0% respectively, as our independent and franchise customer
bases continue to grow.
Independent Pharmacy growth is due to a combination of new customers and increased support
from the current base. The Group has been able to maintain its excellent service levels during these
trying times in terms of operating hours, delivery times and stockholding, which is proving to be
rewarding. The shift in customer behaviour from big malls to more convenient shopping during the
lockdown has also benefited Independent Pharmacy trade.
The growth in the number of TLC franchises, together with the growth that these stores experience
post their joining and rebranding, is proving to be very successful and beneficial to the wholesale
business. Favourable initiatives that franchisees experience on joining include national advertising,
centralised retail expertise and a franchise-specific loyalty programme.
Table 3: SUMMARY
24 weeks ended 24 weeks ended % change % like-for-like
15 August 2020 15 August 2019 retail revenue
(R’m) (R’m) growth
Retail 10 394 9 780 6.3% 1.5%
Wholesale 8 602 7 391 16.4%
Intergroup (7 256) (6 378) 13.8%
Group 11 740 10 793 8.8%
Additional costs as a result of COVID-19
The protocols set up to deal with the COVID-19 pandemic and ensure the protection of our staff and
customers resulted in additional costs.
The largest cost being vouchers valued at R23,5 million that the Group distributed to all staff who
continue to work at the frontline of the pandemic. Management believes this to be a valuable
gratuitous investment in thanking them for their unselfish loyalty during this challenging time.
Table 4: Additional COVID related costs
Expense Amount (R’000)
Staff vouchers and donations 25 500
Personal protective equipment and screening costs 9 117
Staff COVID-19 testing 2 407
Other 4 086
Total 41 110
The figures mentioned above and any information contained herein have not been reviewed or
reported on by the Group’s external auditors.
The Group will report interim results for the six months ended 31 August 2020 on Thursday, 5
November 2020. The results presentation will be webcast only, and further details will be
communicated in due course.
Midrand
25 August 2020
Sponsor
The Standard Bank of South Africa Limited
Date: 25-08-2020 10:00:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
