Chemist Warehouse’s healthy spell

The chemist retail giants sold plenty of medicines, vitamins and hand sanitiser at the height of the pandemic.

Chemist Warehouse co-founder Jack Gance has seen his company’s fortunes continue to thrive during the COVID-19 pandemic. Picture: Aaron Francis

The giant Chemist Warehouse retail chain enjoyed a bumper March driven by “panic buying” as shoppers flocked to buy medicines, vitamins, hand sanitiser and cleaning products.

Headed by Jack Gance and Mario Verrocchi, Chemist Warehouse, which has more than 300 stores across Australia, says its performance exceeded most other retail segments during the COVID-19 pandemic.

Information on the intensely private group, which is said to be planning a huge ASX float later this year that could value the company at up to $5bn, is contained in documents recently lodged with the corporate regulator. They confirm its reputation as a category killer in the $13bn retail pharmaceutical sector.

One part of the Chemist Warehouse empire, East Yarra Friendly Society Pty Ltd, filed its 2019 accounts with the Australian Securities & Investments Commission this week, showing earnings before interest, tax, depreciation and amortisation of more than $13m from $290m revenue.

That revenue could only account for 5-10 per cent of the entire business, meaning the whole group is likely to make annual profits of well over $100m.

The East Yarra accounts shed some light on how well Chemist Warehouse has been growing this year. The report said that while retail pharmacists worldwide had been impacted by COVID-19, retail pharmacy has performed better than most retail segments.

“In March, before the government lockdown restrictions were implemented, retail sales increased as panic buying drove consumer spending. The initial impact led to a significant rise in top-line revenue.”

The commentary in the report said the March surge came after the company had traded largely according to expectations and in line with the performance of recent years.

In April, when the panic buying subsided, Chemist Warehouse experienced a “decline in turnover … as government lockdown restrictions took effect and consumers stayed home. “With the implementation of the … restrictions on the economy, top-line revenue fell.”

The company directors noted, however, they were anticipating the decline and moved to put in place measures to manage costs “and therefore reduce the impact of COVID-19 on the business. Where eligible and appropriate the company also availed itself of government economic support measures”.

The report also presented a brighter picture for the business since April’s downturn subsided, though it did note the retail outlook in Australia as the economy reopens remains an “unknown”.

“While the retail outlook is uncertain, sales in recent times have been more positive and the company continues to trade profitably,” it said, while adding: “The company remains confident it will continue to trade profitably moving forward.”

There are expectations Chemist Warehouse could continue its move towards an ASX float by the end of 2020, despite volatility on sharemarkets worldwide.

Prior to establishing Chemist Warehouse, Mr Gance and Mr Verrocchi bought the Le Specs, Le Tan and Australis brands to Australia in the 1970s and 80s.

They sold the businesses and then entered the pharmacy sector, with only five outlets by 1995 before growth accelerated.