Dis-Chem: Pre-lockdown sales boost is starting to reverse

Pharmaceutical retail group Dis-Chem says the initial sales boost fueled by panic buying after South Africa confirmed its first case of coronavirus is starting to reverse.

Before the lockdown, which started on 27 March, Dis-Chem recorded a 45% jump in revenue for March, with the retailer's profit margin also rising by over 40%. But during the lockdown, which is now in its eighth week, retail revenue tanked 21% in April as the retailer could only sell essential goods. Although the move to Level 4 of the lockdown at the beginning of May has helped arrest that decline, sales recorded a negligible uptick of just 2.8% up to mid-May.  

"The inability to sell high-margin non-essentials, we saw margin also go down 22.7%," said Dis-Chem CFO, Rui Morais, during the presentation of the company's results for the year ended on 29 February.

Dis-Chem said 21% of its business consists of non-essential items that could not be sold under Level 5 of the lockdown. Even though the sale of these items is now permitted and will help boost Dis-Chem's profits, the company said it expects the consumers' expenditure to remain constrained and therefore it's still too early to say if the relaxation of the lockdown will shield it.

"The full extent of the impact of Covid-19 is still unknown. The ultimate impact on trade in the 2021 financial year is currently unknown, as it will depend heavily on the duration of the lock down levels and the normalisation of retail trade," wrote Dis-Chem in a statement.

Essential services weren't spared

While businesses who have been forced to shut their doors during the lockdown might have envied essential service providers like Dis-Chem, the retail group is not the first to flag that keeping its doors open didn't stave off the negative impact of the lockdown.

Pick n Pay, which published its financial results last week, also said not being able to sell high-margin products like alcohol and clothing would affect its bottom line.

Dis-Chem CEO Ivan Saltzman said Covid-19 protocols, which include sanitisation of stores and buying personal protective equipment for staff, have increased the retailers' operating costs significantly.

The e-commerce surge

The group's alternate director, Saul Saltzman, said Dis-Chem recorded a 375% growth in online sales just before the lockdown, from 1 to 26 March.

Even during the lockdown, e-commerce platforms still increased sales by 262% from the beginning of the lockdown to 30 April. As the retailer could sell more goods under lockdown Level 4, online sales have shot up to more than 490% so far in May, compared to May 2019.

Morais said the group has also observed "more support of convenience-focused stores" from customers who want to get in and quickly leave a shop because of Covid-19.

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