What is Chemist Warehouse worth?

A newspaper has shone a light on the investment practices and ownership structure of Chemist Warehouse

In this week’s “How the rich invest” column, Australian Financial Review Rich Editor John Stensholt examined how the My Chemist Retail Group has “shaken up” the community pharmacy sector here in Australia, and Asia, where it is expanding.

He cites documents lodged with ASIC which show the East Yarra Friendly Society Pty Ltd – of which pharmacists Jack Gance and Mario Verrocchi are the directors – made a net profit of $101 million in the 2015-6 financial year.

“Information in the accounts would suggest the numbers could account for roughly half the wider Chemist Warehouse business,” Mr Stensholt writes.

Further information in these documents shows that East Yarra – the main entity through which the My Chemist and Chemist Warehouse brands are controlled – has a total worth, including “entities it owns” and consolidated revenue, of about $1.43 billion.

“The 2016 profit was up from $97 million the previous year, and the business has more than $400 million in retained earnings,” Mr Stensholt writes.

As well as now controlling more than 300 pharmacies in Australia, Chemist Warehouse is set to expand across the Tasman.

Last week it extended its exclusive partnership with Tmall Global, Alibaba Group’s dedicated cross-border e-commerce site.

Alibaba will support Chemist Warehouse during major marketing campaigns such as during the 11.11 Global Shopping Festival in addition to helping it leverage Alibaba’s e-commerce and media properties to better reach Chinese consumers.

Chemist Warehouse reached RMB 100 million ($14.4 million) in gross merchandise volume and finished with a higher GMV than all of the other merchants on Tmall Global during last year’s 11.11 festival. It was the sales leader for the platform’s Black Friday sale, too.

In the AFR, Mr Stensholt writes that the giant’s growth “has not been without controversy and East Yarra has been seen by some in the industry as a way to circumvent laws designed to ensure dozens of pharmacies are not controlled by individuals”.

The two directors bought East Yarra, which was inactive at the time, in 2002; after 2004 it expanded by recruiting franchisees.

“Often these franchisees have a Gance or a Verrocchi as landlord,” Mr Stensholt writes.

This week, Chemist Warehouse partner and co-founder Damien Gance told The Australian that times were tough in retail, particularly due to rising energy bills and unhappy consumer sentiment, and that this was threatening its ability to effectively compete in the marketplace.

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