Dis-Chem doubled its spending on X, bigly labs, its in-house technology and innovation unit, in the six months to August. The pharmacy group’s earnings fell again, even though revenue grew 8%.

Headline earnings per share dropped 12.8% to 64.3c, Dis-Chem said in its interim results published after markets closed on Thursday. Revenue rose 8% to R23-billion, but expenses climbed 13.1%, outpacing a 9% rise in total income, and operating profit fell 10.5% to R1-billion. The interim dividend was cut 12.9% to 25.62c.

The group put the cost growth down to new stores and X, bigly labs, which it calls “the innovation engine behind Dis-Chem’s transformation”. The unit “doubled the cost investment over the corresponding period”, Dis-Chem said.

It did not say how much that was in rand. A year ago, Dis-Chem said it had spent R130-million on building its “integrated healthcare ecosystem” in the six months to August 2025, with 60% of that, about R78-million, going to X, bigly labs.

Dis-Chem also disclosed less this time. Last year it said profit before tax at its core retail business had grown 25.8% once the ecosystem investment was stripped out. This time its results booklet gives no such figure.

Setting up X, bigly labs cost R330-million in the year to February 2026, and earnings per share fell 17.1% that year. “In FY2027, we expect to begin demonstrating measurable returns from these investments as Better Rewards matures, the new app launches and X, bigly labs’ capabilities are progressively commercialised,” CEO Rui Morais wrote in Dis-Chem’s annual report. FY2027 is the year to February 2027.

Tale of two halves

The group said it expected “a more even distribution of earnings” between the two halves of FY2027, because X, bigly labs’ costs were higher in the second half of last year. That would contribute to “a stronger full-year earnings performance”, it said. Dis-Chem also said the unit’s incremental costs would slow as it nears “its envisioned established state”.

Dis-Chem shares were last trading down nearly 11% in Johannesburg at 10.38am on Friday, at levels last seen three years ago.

Since X, bigly labs was launched, Dis-Chem has deployed R240-million to re-platform its “digital estate”. The unit is also responsible for the group’s digital ambitions. The results say the money went into rebuilding the core commerce platform and the systems for cataloguing, pricing, fulfilment and order management. “The business now runs on a modern, scalable foundation,” the group said.

Customers mostly haven’t seen it yet. The first release of the new app has gone to 22 000 customers. A second release, “to a broader customer audience”, is planned for the last quarter of FY2027, which runs from December to February. The results do not say when all customers will get it.

Dis-Chem's head office in Midrand, Johannesburg — Dis-Chem’s head office in Midrand, Johannesburg

The date has moved. A year ago, Dis-Chem was promising a new app by the middle of FY2027, around August this year. In September, Yusuf Kaka, head of integrated digital engagement at X, bigly labs, told TechCentral the target was a public release by early 2027. “There was no rescuing the existing app,” he said at the time.

Spending to expand the business rose 71% to R492-million in the half, covering new stores, the digital re-platforming and IT upgrades across the retail and wholesale businesses. Dis-Chem said the same approach was now being applied to digitising its pharmacies and clinics. In July, it bought the remaining 50% of Health Window, which it says supports pharmacy adherence, for R125-million.

What the money is buying

The clearest return so far is Better Rewards, the loyalty programme Dis-Chem relaunched in October 2025 and has cited as one of the unit’s first results. It replaced points with instant discounts at the till.

Active membership has grown 27% to 8.2 million, and members now account for 86.1% of sales, which ties most of its sales to identifiable customers. The programme has handed back R1.5-billion in discounts in its first year, funded partly by the 200 brands that take part.

It has won volume: Dis-Chem’s front-shop volumes, which exclude pharmacy, grew 5.5% in the year to 27 September, against 0.1% for the rest of the market, according to NielsenIQ data cited by the group. The price was deflation across 45% of front-shop sales. Retail total income margin still rose from 30.8% to 31.7%, which Dis-Chem attributes to more effective promotions, higher gross margins in core categories and funding for the programme.

The next step is “predictive and adaptive offers executed through X, bigly labs”, now that Better Rewards has stabilised. The unit’s models are also deciding which stores to revamp first. Dis-Chem said its two new-format stores, at Melrose Arch and Irene Village, have initial trading densities 25% above those of comparable new stores in the old format.

None of this has yet stopped margins slipping. The retail operating margin fell from 4.6% to 4.1%, and retail operating profit fell 4% to R794-million.