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Dis-Chem strike cost about R50m and counting, group says

Feb 14 2019 17:26

Ongoing industrial action heavily impacted trade at Dis-Chem Pharmacies [JSE:DCP] in December and continues to affect the group, it said in a note to shareholders issued on Thursday.

As a result, the group experienced what it calls an extremely tough trading month with retail revenue growth at 6.2% and retail comparable store revenue at -2.5% - well below its expectations.

According to Dis-Chem, since the labour unrest is still ongoing, the full quantum of the impact is still unknown, but to date, loss of income and additional costs directly linked to the industrial action have amounted to approximately R50m. As a result, it expects earnings growth to be below its guided range.

Although contingency plans were in place to ensure minimal disruption at its retail stores, the group still experienced lost opportunity sales in December, primarily due to stock supply challenges. The group reported its lowest market share gains of the financial year in December.

A national strike at Dis-Chem has been undertaken by a group of employees belonging to the National Union of Public Service and Allied Workers (NUPSAW) since November 16, 2018. About 2 300 employees, the majority from the group's wholesale operations, were part of the protected strike.

At the start of the industrial action, less than 13% of Dis-Chem's employees were registered as NUPSAW members.

Currently in place, and on the back of the labour unrest in January 2018, Dis-Chem and NUPSAW signed an organisational rights agreement that sets out the representation levels that are required by the union to engage with Dis-Chem in a capacity as a representative union. The organisational rights agreement requires 30% employee representation.

The union's demands include a minimum wage of R12 500 across the board, an annual increase of 12.5% guaranteed for the next three years for all employees, and a guaranteed annual bonus.

In addition, after discussions with the CCMA, the union has a requirement for Dis-Chem to take back all employees that have transgressed picketing rules, or have damaged company property and attacked fellow employees and damaged their possessions.

According to the statement, the group feels the demands are unreasonable, considering the economic climate and the nature of the industry in which the wholesale business competes.

During the 22-week period from September 1, 2018 to February 2, 2019, Dis-Chem recorded group revenue growth of 10.7% to R9.4bn over the corresponding period in the prior year.

Saltzman said that, as was the case in the previous calendar year, the group continued to see constrained consumers searching for value offerings.

nupsaw  |  dis-chem  |  retail  |  labour  |  strike action  |  earnings reports
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