Sigma reported 1H26 normalised revenue growth of 15% and EBIT growth of 19%. The sales result was strong but the modest operating leverage is a reminder of the inherently low gross margins in the business. Sales trends are strong but likely to slow from here. We expect LFL to remain double-digit in 2H26e, but then slip into single-digit territory for FY27e as the company laps higher growth and price inflation fades. Going forward, each 1% sales growth to translate into approximately 1.5% EBIT growth. Synergies will continue to help earnings over the next four years.

Sigma Warehouse reported its 1Q26 sales at its AGM. Chemist Warehouse like-for-like sales were up 14.7% for the quarter, an acceleration on FY25 trends. The company highlighted elevated sales of weight-loss drugs like Ozempic as a big contributor. We estimate the contribution is anywhere from 3%-5% of the LFL growth. We expect LFL sales to settle back at 11% in 2Q26e and 9.0% in 2H26e.

Sigma reported FY25 network sales growth for Chemist Warehouse of 14% and EBIT at $903 million, up 47%. The company reported a continuation of double-digit like-for-like sales growth with a lift in profit margins for the underlying Chemist Warehouse business. We forecast EBIT growth of 22% in FY26e ahead of revenue growth of 15%. Margins will be helped by penetration of Wagner private label, operating leverage from strong comp sales and the increasing synergies over the next four years.

The Sigma-Chemist Warehouse merger formally completed on 12 February 2025. This report provides our pro-forma updated forecasts and model for the combined entity. We also explore three bull and bear arguments on the stock given its lofty valuation still makes it difficult for us to have anything but a Sell rating.

Chemist Warehouse has provided a trading update for the 1H25 results last week subsequent to shareholder approval of the merger with Sigma Healthcare. The 1H25 results are very strong with profit margins up 138bp (on network sales) in 1H25. What’s driving results? While not disclosed, we estimate more than half comes from higher gross margins with a benefit from the new Sigma supply agreement. We expect FY25e EBIT margins to be up 101bp. We now set our long-term EBIT margin for Chemist Warehouse at 8.2% of network sales compared with 7.4% previously.