May 16, 2019 / 7:22 AM / a year ago

UPDATE 1-South Africa's Dis-Chem annual profit misses estimates

(Adds result details, industrial strike impact, share price reaction)

JOHANNESBURG, May 16 (Reuters) - South African drugstore chain Dis-Chem Pharmacies Ltd’s full-year earnings rose by less than expected, the company said on Thursday, as prolonged industrial action offset the impact of price cuts and aggressive promotions.

Dis-Chem said headline earnings per share (HEPS) climbed to 85.4 cents in the year ended February from 79.6 cents per share a year earlier, but they still fell short of an average analysts’ estimate of 87 cents from Refinitiv I/B/E/S.

Headline EPS, which strips out certain one-off items, is the most widely watched profit measure in South Africa.

“Unfortunately, the industrial action which began mid-November last year heavily impacted the group’s performance in the current financial period,” the firm said in a statement.

This translated to slower retail revenue growth of 9.7% to 19.6 billion rand, with comparable store revenue growth at 3.4%. Wholesale revenue grew by 11.2% to 14.5 billion rand.

Comparable store revenue was hurt by competitive pricing across the personal care and baby sectors, and by a Department of Health decision to implement only a small rise in the maximum price Dis-Chem is allowed by law to charge for some products.

At 0718 GMT, shares in Dis-Chem were down 3.4 percent at 26.60 rand.

About 2,300 Dis-Chem employees belonging to the National Union of Public Service and Allied Workers (NUPSAW) went on a national strike from November until April, demanding among other things a rise in the minimum wage.

Dis-Chem, which competes with Clicks Group, said as a result of the strike it incurred direct costs of 50.4 million rand and indirect costs of between 22.3 million rand and 26 million rand. ($1 = 14.2436 rand) (Reporting by Nqobile Dludla; editing by Gopakumar Warrier and Jan Harvey)

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