Pharmacy and cosmetic sales have averaged 10% growth. Dis-Chem Pharmacies said that headline earnings per share in the six months to August 2017 were set to be 34.8%-39.5% higher than those of the matching period in 2016.

That is based on the weighted average number of shares in issue being 860-million, compared to 794-million in the prior period. This comes after the listing of 27.5% of the group’s issued share capital on the JSE on November 18 2016.

Damon Buss, an analyst at Electus Fund Managers, said on Tuesday Dis-Chem’s trading update was largely in line with Electus forecasts.

Reasons for the growth included that pharmacy and cosmetic sales had averaged 10% growth in the year to date for 2017, compared with about 6.5% total retail sales growth, as Statistics SA data showed.

"Dis-Chem and Clicks dominate this category and have been gaining market share from the independent pharmacies, hence they are outperforming the Stats SA numbers," he said.

Buss said that the bulk of Dis-Chem’s products were necessities. These were less cyclical. He also said that, while the balance of products were luxury and discretionary goods, they were not big-ticket items. "Hence when the consumer is strapped they are still willing to buy these small luxuries, yet they hold back on the big items [such as cars and TVs]," he said.

The share has climbed steadily from about R21 since listing to nearly R32 now.

Dis-Chem has been in business for more than 30 years and is 67%-owned by the Saltzman Family Trust. It is run largely by family members.

Buss said that Dis-Chem had been aggressively rolling out stores. "On listing [the group] stated they wanted to double the number of stores from 100 to 200 over the next five years," he said. New stores had a ramp-up period of between five and seven years to get to a normalised operating level.

"Trading on a 12-months forwards p:e [price:earnings multiple] of 34 times, we think [Dis-Chem is] very expensive and is priced for perfection, which is going to be very difficult to deliver in a poor consumer environment," Buss said.

Dis-Chem was a standout performer among food and drug retailers on the JSE on Tuesday.

The stock closed 7.45% higher at R31.16. Clicks closed 3.92% up at R159.

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