Dis-Chem has been quick to jump on the e-tail bandwagon, more than tripling online sales in the first four months of its financial year as some customers remain reluctant to venture out to do their shopping. However, after a big decline in footfall at shopping centre-based stores during last year’s lockdown, it’s seen a recovery in customers there too.

 The pharmacy and healthcare group has reported a strong rise in sales for the first five months of its financial year, although admittedly higher prices played a part. Retail revenue jumped 10.3% to R10.4-billion for the 22 weeks to 2 February, with healthcare, vitamin and chronic drug sales doing particularly well as consumers continued to focus on preventative healthcare. Like-for-like revenue grew 5.1% and it raised prices by an average 3.6% over the period.

 Sales at its older stores located in regional shopping centres are still down on last year – although the 2% decline is an improvement on the 8% contraction for the period between March and August 2020. Its convenience centres, those based outside malls, grew like-for-like sales by 10.2%. Online sales surged 219% from the same period last year. 

 Transactions at recently-acquired Baby City are excluded from the group’s like-for-like numbers but the 33 stores it took over reported retail revenue of R73.4-million in the space of a month. 

 Dis-Chem’s wholesale business has also been doing very well, with revenue jumping 20% to R8.6-billion over the 22-week period. While a lot of those sales are back to its own retail stores, its growing distribution network and sales to independent pharmacies have also supported the growth.  

 While sales have done well, Dis-Chem says the change in consumer shopping behaviour due to Covid-19 has impacted its sales mix and, in turn, its profit margins. They continue to lag pre-Covid-19 levels. That may have something to do with shift to online sales as customers are less likely to be tempted by the vast array of non-essential items that find their way into shopping trolleys. 

 Dis-Chem has a historic price/earnings ratio of 31 times, which means its shares are valued at 31 times annual earnings. That’s in line with Clicks’ multiple of about 33 times. Both are well above the average for the retail sector and means investors are pricing in strong growth in future earnings. JP Morgan has raised its recommendation on Dis-Chem to ‘Overweight’ with a price target of R25.30, which it is creeping closer to after yesterday’s 1.8% rise in its share price. DM/BM