Pharma retailer Dis-Chem CEO Rui Morais says the competitor that worries him most is not arch-rival Clicks but supermarket giant Shoprite. The Checkers owner already has millions of customers ordering from their phones on Sixty60, and Morais expects it to add medicine delivery at some point.
Shoprite is rewriting what shoppers expect from retail. It has a vast base of known customers, a delivery app that has taught South Africans to order groceries from their phones and the pricing muscle to commoditise categories. For the moment, Sixty60’s hitch with pharmaceutical products is that a pharmacist must sign off every order, and Shoprite has far fewer pharmacy licences and pharmacists than Dis-Chem and Clicks.
The two pharmacy groups’ own delivery platforms are “not as good”, but are improving. Still, there is the risk that Sixty60’s familiarity may cost them some over-the-counter and front-shop share, though that is a concern for two to three years’ time.
Dis-Chem, in the meantime, is moving fast from a pharmacy-led retailer that sells front-shop goods to a digital omnichannel, data-led health ecosystem, and the shift is expensive. In the six months to August 31 2026, group revenue rose 8% to R23bn. Retail revenue grew 8.2%, and Dis-Chem posted its biggest market share gains in Morais’s 16 years at the company. But operating profit before tax fell from R660m to R581m and headline earnings dropped 13% to 64.3c a share.
The centre of the shift is Better Rewards, a loyalty programme launched last October. Every product from a participating brand carries a minimum always-on instant discount of 10%, with “boosts” layered on top: 5% when shoppers pay with a Capitec card, 5% for a 30-day cycle when customers engage with the pharmacy and a 5% gifting boost for December. The average discount shoppers get is close to 15%. Dis-Chem says it has handed back R1.5bn in value over the first 12 months since the launch of Better Rewards. Front-shop volumes grew 5.5% against 0.1% for the market, and baby care, the most price-sensitive category, responded most strongly.
About 86% of sales now come from members. Active membership has grown 27% to 8.2-million, including nearly a million new members largely from the Capitec tie-up and 760,000 lapsed members who had been lured back. Shoppers who were already loyal are visiting more often and spending 3.7% more per basket. The next layer is hyper-personalised promotions.
The script, Morais is blunt, is what makes Dis-Chem unique, and the company obsesses over capturing it. Dispensary revenue grew 10.4%, double the market’s 5.1%, helped by surging demand for GLP-1 weight-loss drugs and a pharmacy boost that nudges script customers into the front shop. Because those drugs are so expensive, they inflate dispensary value. Morais says generic versions will bring prices down, and he sees GLP-1s eventually being managed like any chronic condition. Independent pharmacies, he says, are a rival he can never beat on service but is beating on price and convenience.
Technology is meant to widen that lead. Dis-Chem has put about R240m into digital architecture, a prerequisite for a new app, which has been released to 22,000 customers with a broader launch due by year-end. Morais pictures a customer submitting a script by app, optical recognition checking benefits, and dispensing done before arrival, so collection takes two minutes. Dis-Chem spends about R2bn a year servicing scripts, and every minute saved is cost removed.
The physical format is changing too. Every new store will be a “store of the future”, with a central health hub offering services including a body scanner and skin analyser. Initial trading densities are 25% above the old format, and script times have fallen to five to eight minutes from about 20. Fourteen stores opened in the first half, with 30 expected by year-end.
Behind all this sits an organisational overhaul. The founders, who built the business around the script, have left the company, and a section 189 restructure is about 60% complete. Morais says it is aimed at speed and accountability rather than savings, with no incremental cost, though a small number of retrenchments is likely. He expects second-half earnings growth ahead of revenue growth and wants operating margin back up from 4.4%.
But let’s not forget that Dis-Chem and Clicks are chasing the same consumer. Both companies lean on pharmacy, where demand for GLP-1s is driving growth, and both use the script to pull loyal customers into the front shop. Both are fighting price competition with big loyalty programmes and reinventing themselves as broader health platforms. While Dis-Chem is spending heavily to transform — and this has dented its profits even as it gains market share — Clicks is the steadier earner but is growing more slowly.
That said, Clicks had its toughest year yet. Pharmacy and a revamped loyalty programme carried the group, but the wholesale arm is under pressure and competition is relentless. Its results for the year to end-August showed turnover still growing and headline earnings higher, but both fell short of market expectations. The share has subsequently drooped.
Turnover rose 5.4% to more than R50bn, crossing that line for the first time. Diluted headline earnings climbed 4.4% to R14.22 a share. The dividend rose by the same margin to 925c a share, a 65% payout ratio. Overall, the group returned R3.4bn to shareholders — R2.1bn in dividends and R1.3bn in buybacks. Cash generated from operations was R6.3bn and return on equity remained an industry-envied 48.7%.
Aggressive competition
Clicks CEO Bertina Engelbrecht said the trading period saw the most aggressive digital and in-store promotional competition in years. Even so, profit outran sales; retail trading profit was up almost 10% and the trading margin improved to 11%.
Pharmacy was a growth engine. Sales grew 7.3%, led by diabetes and GLP-1 medicines, and now make up 27.6% of retail sales. Clicks lifted its retail pharmacy market share to 24.7%. But the front shop was patchier. Beauty and personal care, the biggest grouping, grew 4.5%. Front-shop health and baby grew 2.2% and general merchandise 1.3%. Skincare share slipped 100 basis points, though Clicks still takes more than R4 of every R10 spent in the category.
Wholesaler UPD was the weak spot. Trading profit fell 10.4% and the margin dropped to 2.7%. The culprits were a single exit price increase of just 1.47%, the loss of two distribution contracts in the prior year and a hospital market shrinking as generics take share.
Clicks’ answer to the price wars is loyalty. Active membership reached 13.1-million, accounting for 84.2% of sales. In August, the group launched “Pay Even Less”, giving members a further 10% off about 3,000 products, and added Standard Bank and Absa to its banking partners. Food Lover’s Market is about to join as a grocery partner, though no details about this have been provided.
The group is also trying to reposition itself as a broader health-care and beauty platform. It has UniCare, its 24-hour specialist pharmacy operation, which has five sites and could grow to between 15 and 20, with oncology as an aspiration. KwaMakhi, a small-format township convenience brand, will grow from four pilot stores to 10 by year-end. Clicks’s share in ARC, the premium beauty retailer, is set to go up from 25.7% to 61% (subject to Competition Commission approval) and Sorbet, the salon chain, has made its first moves outside South Africa.
Expansion is still very much on the cards. Clicks opened its 1,031st store and 835th pharmacy and still wants 1,200 Clicks stores by opening 40 to 50 a year. Planned capital expenditure is about R1.4bn, more than R780m of it on stores.
While the market has not lately been enamoured of Clicks, large asset manager Allan Gray thinks the sell-off has gone too far. Portfolio manager Rory Kutisker-Jacobson says the market is worried about renewed competition from Dis-Chem and Shoprite, as well as about some missteps by the company. But he sees a business being derated rather than a broken one.
He points out that Clicks traded at more than 30 times earnings for a long period, a rating that holds only if growth stays exceptional. It now trades at about 15, with return on equity still comfortably above 30%. “We would rather own a good retailer after the market has taken the froth out of the price than pay up for the same business when everyone agrees it is wonderful.”
Sean Culverwell, an analyst at Anchor Capital, says competition has heated up since Dis-Chem launched Better Rewards, hurting Clicks’s revenue and market share. “You saw it in Clicks and Dis-Chem’s latest results to the end of August.”
He notes that Clicks revamped its ClubCard programme in August and that time will tell whether it can win back lost customers. “It’s not necessarily a price war, because suppliers are funding a lot of the discounts. Some of the recent softness at Clicks may well reverse.”
