Chemist Warehouse unveils massive profit as owners share $280m dividends

Revenue for the huge retail chain reached $3bn, making it one of the biggest private companies in Australia. But talks about its business structure, potentially a precursor to a float, are dragging on.

Chemist Warehouse made huge profits this year, as the fast-growing retail chain enjoyed a massive sales spike during Covid-19 lockdowns and surfed a consumer shift towards buying online.

But rumoured efforts to float the group on the ASX or potentially sell to an overseas buyer seem to be continued to be stymied by negotiations with the Pharmacy Council of NSW over Chemist Warehouse’s business structure.

Revenue for the group, headed by billionaires Jack Gance and Mario Verrocchi, surged past $3bn for the first time and Chemist Warehouse made one of the biggest profits by an Australian private company.

Financial accounts for parent company CW Group Holdings show Chemist Warehouse had a pretax profit of almost $550m from revenue of about $3.08bn. Business model changes in 2021, including a new wholesale supply agreement and changes to leasing and fee arrangements with franchisees, led to a statutory net loss of $176m from $2.42bn revenue.

Chemist Warehouse’s net profit for the year to June 30 was $385m, up from the $227m result it recorded in the 2020 financial year. The business enjoyed a 27 per cent revenue rise year-on-year.

Chemist Warehouse booked a pretax profit of almost $550m from revenue of about $3.08bn for the 2022 financial year. Picture: Gaye Gerard/NCA NewsWire

It was reported last year that Chemist Warehouse has been contemplating launching the process for an ASX float, which could have valued the business at more than $5bn. Adviser Rothschild had reportedly sent invites to investment banks to pitch proposals, with Macquarie Capital later reported to have also been involved.

Changes in Chemist Warehouse’s business model last year were thought to be a precursor to a float, with CW Group directors said they had consulted with state and territory pharmacy regulators about the changes to the business model.

But a note in the group’s 2022 accounts revealed some negotiations were still ongoing.

“As at the date of this report, the Pharmacy Council of NSW (PCNSW) has not approved the changes for that jurisdiction,” the note said.

“A process of engagement with the PCNSW is ongoing and Directors expect a successful outcome will be achieved.”

Otherwise, the group’s latest financial report shows just how huge a business, Chemist Warehouse has become – and how the two families behind the business are reaping the rewards.

Documents lodged with the Australian Securities and Investments Commission this week

Show Chemist Warehouse co-founders Mr Gance and Mr Verrocchi’s respective families shared $155m of dividends for the 2022 financial year.

In late September, Chemist Warehouse directors declared another dividend of $132m.

The Chemist Warehouse business is part of the overall My Chemist Retail Group, and has more than 500 stores across Australia and employs more than 17,000 staff.

It has also expanded overseas in recent years, with new stores opening in China, Ireland and New Zealand during 2022.

Jack Gance is the co-founder of Chemist Warehouse, which recorded a massive profit. Picture: Aaron Francis

Chemist Warehouse directors said the most recent financial year, which included some partial Covid-related lockdowns in some states, “proved challenging” but that the group had managed to react positively to changes in consumer spending behaviour.

“The group was able to respond effectively to the difficulties presented by Covid as consumers looked for cost-effective pharmaceutical, healthcare and beauty products,” a note in the 2022 accounts says.

“Pharmacies were classified as essential services and were able to remain open even during periods of Government imposed lockdowns impacting retail trade.

“The most notable impacts of Covid included softer retail conditions, impacting wholesale sales revenue growth. This was due to [the] negative impact of Covid on the retail pharmacy franchisee store sales, particularly in CBD and shopping centre stores. However, this has been offset to some extent by greater demand for pandemic related product lines and the continued acceleration of online sales due to a shift in consumer preference.”

Mr Gance and Mr Verrocchi, both members of The List – Australia’s Richest 250, oversee a business that has been one of the nation’s greatest entrepreneurial success stories in the past two decades.

Mr Gance qualified as a pharmacist in 1967, and bought his first chemist soon after. He also started selling sunglasses to other chemists in his early days in business, eventually bringing the Le Specs and Le Tan brands to Australia.

The My Chemist chain grew, but Mr Gance and Mr Verrocchi spotted an opportunity for more of a retail focus for profitable chemists stores, dropping prices and building what is now Australia’s biggest pharmacy retailer.