Chemist Warehouse revenue hits $3bn, but profits fall as founders share in $364m dividend payday

Jack Gance and Mario Verrocchi built one of Australia’s most successful private Australian businesses. New accounts shed light on just how profitable it's become.

Chemist Warehouse co-founder Jack Gance heads one of the biggest private companies in Australia

High costs have cut into Chemist Warehouse’s massive profits, but it continues to be one of the biggest private firms in Australia – and one of the biggest dividend payers.

Founders Jack Gance and Mario Verrocchi and their respective families shared in $264m dividends during the 2023 financial year, and another $100m dividend declared in early October.

The Gance and Verrocchi families own the privately-held CW Group Holdings, the main company behind the Chemist Warehouse empire.

According to financial accounts lodged with the corporate regulator on Wednesday, CW Group made a net profit of $302m for the year to June 30, down about 22 per cent from the $385m result a year earlier.

Revenue reached $3.09bn, compared to $2.99bn in 2022.

A $250m increase in cost of sales on the CW Group Holdings balance sheet was the main reason for the difference in net profit.

The business increased marketing expenses to about $77m, from $63m last year, but otherwise kept a tight rein on administration and general expenses and net finance costs, both of which fell.

The account shed light on what is otherwise an intensely private but extremely successful business, which Mr Gance said earlier this year at The Australian’s Global Food Forum now in total has about $8bn annual revenue across 600 retail stores and employs almost 20,000 people.

“During the year international expansion continued with new Chemist Warehouse stores opening in New Zealand, Ireland and China,” a note in the accounts said.

Chemist Warehouse opened its first of what are now seven stores in China in 2019 and Mr Gance said in May that sales were improving now Covid-19 lockdowns had ended.

His business also has strong online sales on the Alibaba website, and Mr Gance said the Chinese daigou or reseller market has usually been worth about $200-$300m in annual sales for Chemist Warehouse.

Mr Gance also revealed Chemist Warehouse sells about $1bn of vitamins each year in Australia, made by brands such as Swisse and Blackmores, in a market of about $1.6bn.

Separately, in August Chemist Warehouse entered into a contract with ASX-listed Sigma Healthcare for Sigma to supply Chemist Warehouse with Pharmaceutical Benefits Scheme (PBS) medicines and fast-moving consumer goods (FMCG) for five years starting from July 1 2024.

“The purchase commitments under the contract in the first year are $3bn,” a note in the CW Group Holdings accounts said.

While Chemist Warehouse dominates the retail chemist sector, it has less of a market share of the hospital pharmacy space. To break into that part of the market, it is embarking on a joint venture with Cathie Reid and Stuart Giles, members of The List – Australia’s Richest 250 and built the cancer care giant Icon Group and the Epic Pharmacy Chain.

The joint venture will be called Chemist Warehouse Hospital Pharmacy.

Chemist Warehouse has long been mooted as a float candidate for the ASX and Mr Gance has had discussions with a string of investment banks about how a deal – worth well north of $5bn – could be structured.

“For us an IPO or something like that would be for succession planning for the family, and we’ve got 240 partners that are in partnership with our franchisor. For us, we are looking for long-term stability and some sort of liquidity, but we are not in a hurry to get to the table and the [IPO] market is terrible at the moment,” Mr Gance told The Australian’s Global Food Forum in May.

Adviser Rothschild has previously reportedly sent invites to investment banks to pitch proposals, with Macquarie Capital later reported to have also been involved in any potential Chemist Warehouse IPO.