Dis-Chem slips 5% as same-store sales moderate

Shares in Dis-Chem fell more than 5% on Friday despite the pharmaceutical retail giant reporting that payroll cost containment measures have helped it book a sharp increase in interim earnings.SA's second-biggest pharmacist by store numbers reported that its revenue grew 9.6% to R19.6 billion in the six months to end-August and headline earnings 16% to R580 million.The group also increased its dividend by 16.1% to about 26.98c, but in morning trade, its shares slipped 5%. Just before 10:00 they had pared gains to trade about 3.3% lower. It has still gained more than 59% in the past year, valuing the group at about R31 billion.One concern may have been the group's moderate like-for-like sales, which one analyst said implied little volume growth, while another also noted the group's expensive share price indicated the market expected more from Dis-Chem from an earnings perspective.The group said its biggest contributor to earnings growth was the containment of its payroll cost, predominantly driven by the successful deployment of "staffing framework 1.0," which delivered positive operating leverage, allowing operating profit to grow at a faster pace than revenue.Like-for-like retail employee costs increased by 0.7%, with the group, which is adding stores, looking to redeploy staff to ensure a "consistent and optimal mix" without compromising its service levels.However, comparable pharmacy store revenue growth was 4.8%, having reported 5.9% in the prior comparative period.Store footprint During the period, the group opened six retail pharmacy stores, bringing the group's total retail pharmacy store footprint to 274.The group had 53 retail baby stores as of the end of August.Its wholesale revenue grew by 10.1% to R15.1 billion, with the group noting that wholesale revenue to its own retail stores was still the biggest contributor, growing 6.8%.External revenue to independent pharmacies and The Local Choice (TLC) franchises grew by 26.6%. Independent pharmacy growth was 30.3% attributable to both new customers and increased support from the current base, and TLC growth was 21.8% due to a combination of an increase in TLC franchise stores from 180 to 221 together with increasing support of the supply chain from existing TLC franchisees, it said.Its TLC franchise stores' reported growth was 21.8% due to a combination of an increase in franchise stores from 180 to 221, as well as "increasing support of the supply chain" from existing TLC franchisees.Dis-Chem reported that total income grew by 10.4% to R6 billion, with the total income margin increasing slightly to 30.7% from 30.5%. Its retail total income margin picked up to 30.2% from 29.8%, which it said was "predominantly due to an increase in transactional gross margin across all core categories".

Dis-Chem slips 5% as same-store sales moderate

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Dis-Chem slips 5% as same-store sales moderate

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