A quick visit to the Dis-Chem investor relations website revealed a useful “trafing update” covering September 2024 to January 2025. Thankfully, the quality of the business is significantly better than the standard of its website proofreading.
Despite this, Dis-Chem hasn’t been shielded from the value deterioration of JSE-listed retail stocks in 2025. Before we dig into recent Dis-Chem numbers, it’s important to give context to the share price performance.
The year-to-date drop at time of writing is 14%, significantly worse than that of its archrival Clicks at -9.2%. Over 12 months, Clicks is the winner once more, up about 10.5% while Dis-Chem is down 3%. Though the starting date gets dicey for a five-year view considering the timing of lockdowns, Clicks is up 47% over that period and Dis-Chem is up 43%.
Notably, Dis-Chem has been far more volatile along the way, so investors choosing a player in this sector should see Dis-Chem as the riskier choice. This is an objective view based on observed share price volatility, not a subjective one based on the underlying business.
Charting the relative earnings multiples of this dynamic duo is incredible. Over five years, Dis-Chem has averaged 30.5 and Clicks 31.5. The correlation between the multiples is extremely strong, with the gap slightly larger than usual at the moment with Dis-Chem at 25.2 and Clicks at 28.4. Aside from traders looking to actively play the correlation in the form of the gap opening and closing temporarily, the lesson to take from this is that the market has these companies in the same WhatsApp group and struggles to choose between them from a valuation perspective.
Relative share price performance over longer periods is being driven by earnings instead of changes to the multiples. Naturally, overall (not relative) performance is heavily influenced by multiples.
It’s also worth pointing out that present multiples are lower than the 12-month, three-year and five-year averages. Sentiment has soured towards JSE-listed retailers, making it a worthwhile exercise to dig into this space and see if any babies (or baby specialists) were thrown out with the bathwater.
Towards the end of 2024, we saw some decent top-line numbers in discretionary retail categories such as clothing and even furniture. This is important for Dis-Chem, which has numerous discretionary retail categories. Practically everything you walk past from the till to the dispensary could be considered discretionary, with Dis-Chem relying on shoppers adding to their baskets as they walk.
This is because dispensary margins are notoriously thin, especially operating margins after accounting for expensive professional staff (pharmacists). It therefore would’ve been great to see the uptick in discretionary spending landing in the till at Dis-Chem. Alas, there’s little evidence of that, with retail revenue up 5.6% for the period and like-for-like sales up just 2.9%.
Wholesale is a far more inspiring story, with revenue up 11.1% and sales to own stores up 9.6%. This has been a major focus area for Dis-Chem. If it can supply more products into its own stores over time, it is capturing a greater portion of the economic profit pool without further investment in the retail footprint. That’s great for return on capital. With sales to own stores growing at a much faster rate than retail sales, we can safely conclude it is winning a greater share of each store’s procurement spend.
Wholesale has been a major focus area for Dis-Chem, with revenue up 11.1% and sales to own stores up 9.6%
Perhaps the biggest boost of all comes from supplying competing pharmacies and The Local Choice franchisees. Pharmacy licences aren’t the simplest things to get hold of and there are limits on how many are provided in a particular area. This is why it’s so important to see growth in wholesale at Dis-Chem, as it cannot realistically get its hands on all the licences it would like to have. Revenue from external customers rose 18.8%, indicating it is successfully tapping into this source of growth.
Full-year results are due for release on May 30. Interim headline earnings may have grown 16.3% off revenue growth of 9.6%, but it looks as though the second half of the year would’ve come in lighter for headline earnings growth based on revenue growth of 7.2%. The share price is in falling-knife territory, trading close to 52-week lows and with little to suggest sentiment will return to 2024 levels.
If anything, a break even lower is possible, with R29 as an important level. If that fails, the next stop is about R25. This means the risk/reward situation just isn’t appealing at the moment, with no obvious catalyst for sentiment to improve in the South African consumer story.
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