Dis-Chem says store roll-out on track, as strike cuts into December earnings

Dis-Chem Pharmacies [JSE:DCP] says its plans of growing store numbers are on track despite a constrained consumer market.

The health and beauty chain released its provisional reviewed full-year earnings for the year ended February 28 on Thursday.

It recorded a 10% increase in group revenue to R21.4bn. Earnings per share and headline earnings per share were both at 85.4 cents, an increase of 7.4% over the previous period. The pharmacy chain declared a cash dividend of 13.47 cents per share for the year ended February 28, based on 40% of headline earnings.

Its shares were trading at R27.50 a share at 12:22 on Thursday, down 0.15% on the day. 

“The group remains focused on adding retail stores. Five stores have been added since the financial year end and an additional 17 store openings are planned through to February 2020,” it said. 

Dis-Chem Chief Executive, Ivan Saltzman, said in a statement that “considering the consolidation theme playing out in the retail pharmacy industry, space growth using the appropriate store format remains and will continue to remain a fundamental driver of group growth.”

The group plans to add 20 stores a year. 

Labour strife 

The pharmacy chain is recovering from a five-month labour strike, which started on November 6, 2018 and ended in mid-April.  Some 2 300  Dis-Chem employees, mainly from wholesale operations participated in the strike, demanding a minimum wage of R12 500 across the board, including an annual increase of 12.5% for all employees and annual bonuses.

The strike cost a total of R50.4m in additional direct costs, said Dis-Chem, which included legal costs, security, and the training of temporary staff. It estimated indirect costs at between R22.3m and R26m. 

"In December, which was the most impacted trading month, retail revenue growth was only 6.2% with comparable store revenue of negative 2.5%, which was well below our expectations."

"Although contingency plans were in place to ensure minimal disruption at our retailstores, we experienced lost opportunity sales primarily due to stock supply challenges."

The workers later withdrew their demands and returned to work on April 10, said Dis-Chem.