Join our daily newsletter At The Bell to receive exclusive market insights
The $8.8 billion dollar merger between Sigma Healthcare and Chemist Warehouse is poised to reshape the Australian pharmacy landscape, consolidating power in the hands of two industry giants. But what does this mean for Australians – greater access to cheaper medicines or the loss of small, community-focused pharmacies? With Chemist Warehouse’s retail dominance and Sigma’s extensive distribution network, this deal creates a pharmaceutical powerhouse that may leave small businesses gasping for air.
Investors have cheered the move – Sigma’s stock surged 28 percent after the ACCC approved the merger with conditions. But the benefits to shareholders and consumers could come at a steep cost: The survival of small, independent pharmacies.
Chemist Warehouse’s model of lower prices and large-scale operations has already placed significant pressure on smaller competitors. This merger amplifies that pressure, particularly in regional areas where small pharmacies provide essential, personalised services.
For many of these businesses, competing against a combined Sigma-Chemist Warehouse behemoth may prove impossible.
The ACCC has attempted to strike a balance, implementing safeguards like allowing easier switching for pharmacies and limiting the use of customer data. While these measures aim to ensure fair competition, they may not be enough to counter the scale of the merged entity. Smaller pharmacies are unlikely to match the efficiencies and pricing power that come with such consolidation, leaving many vulnerable to being priced out of the market.
This dynamic reflects broader trends in Australian retail. Similar concerns arose during the Woolworths-Caltex partnership, where efficiency gains for the big players came at the expense of smaller service stations. The parallels suggest even with regulatory oversight, smaller businesses often bear the brunt of such mergers, unable to compete on an uneven playing field.
As the pharmacy sector moves toward consolidation, Australians must grapple with what they value most—lower prices and convenience from large-scale operations or the survival of local businesses that deliver personalised care.
If the Sigma-Chemist Warehouse merger sets the stage for an industry dominated by a few massive players, it’s worth asking if such consolidation is a price Australians are willing to pay.
What are the best and worst-performing sectors this week?
The best-performing sectors include Utilities, up over two percent, followed by Energy and Information Technology; both up over one and a half percent. The worst-performing sectors include Real Estate and Consumer Discretionary, both down over half a percent, followed by Health Care, down under half a percent.
The best-performing stocks in the ASX top 100 include Northern Star Resources and Technology One, both up over 10 percent, followed by Evolution Mining, up over eight percent.
The worst- performing stocks include Pilbara Minerals, down over 11 percent, followed by IDP Education and James Hardie, which are both down over five percent.
What’s next for the Australian stock market?
This week saw buyers drive the All-Ordinaries Index to a fresh all-time high. However, the rally faltered as sellers regained control, casting doubt on its sustainability. Despite the back-and-forth, the market has so far closed the week with a modest gain of just under half a percent.
Interestingly, the last time the All Ords failed to close above a previous weekly peak was in August, which coincided with the steepest one-week decline of the year. If the index cannot close above 8,654 this week, it could signal another wave of selling next week. On the other hand, if sellers don’t materialise, a break above this week’s high could reignite the uptrend and pave the way for a strong finish to 2024.
Against this backdrop, sector performance revealed a more nuanced story. Financials and materials turned in subdued results, limiting the broader market’s upside. The materials sector, in particular, continues to lag financials, which has been the year’s standout performer. Yet, there’s a glimmer of hope in the energy sector, where early signs of a turnaround are emerging.
This week, the ASX 200 Energy Index (XEJ) tested its September 24 low – a promising development. If the index builds on this strength and breaks through the 9,600-point level, it could confirm a significant bottom was established in September. Such a move would signal the potential for a prolonged bull run, offering exciting opportunities for energy stocks known for their capacity to deliver rapid gains.
As for the broader All Ords Index, its resilience is evident, but further short-term growth hinges on breaking the 8,700-point resistance. A failure to clear this level could lead to a more substantial pullback, particularly after the extended uptrend over the past year. In such a scenario, support of around 8,300 points will be a critical level to monitor if selling pressure intensifies.
For now, good luck and good trading.
Disclaimer: While Wealth Within holds an Australian Financial Services License (AFSL:226347) the information featured in this program is general in nature and therefore should not be relied upon. Before making any investment decisions, you should consult a licensed professional who can advise whether your investment decisions are appropriate for you.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
