Shufersal Faces Declining Sales and Profitability Amid Limited Efficiency Gains

Shufersal, Israel's leading supermarket chain, reported a challenging second quarter marked by declining sales and shrinking profitability, highlighting a difficult dilemma for the retailer. Identical store sales fell by 8.5% and sales per square meter dropped by 8.7% compared to the same quarter last year. Gross profitability at stores decreased to 28.9% from 29.9%, while operating profit in retail plummeted by 43.5%. These results also severely impacted the company’s cash flow, which fell 71% to 72 million shekels from 246 million shekels in the prior year quarter. Following the report, Shufersal’s stock dropped 7.3% on the Tel Aviv Stock Exchange.

The Amir brothers, Yossi and Shlomi, who took control of Shufersal in early 2024 during a period of strong food retail sales amid the Gaza war, initially saw sales rise by 4.8% in the first half of 2024. However, since then, the chain has experienced continuous declines: a 7.3% drop in total sales and an 8.6% decline in identical store sales in the first half of 2025, followed by further decreases in the first half of 2026. The core challenge is that Shufersal needs to improve profit margins, likely through price increases, but higher prices risk driving customers away in Israel’s highly price-sensitive food market.

The company has already implemented significant cost-cutting measures, including closing unprofitable stores, converting 30 outlets to the discount format "Universe," negotiating better supplier prices, reducing head office staff, and expanding private label sales. Despite these efforts, further efficiency gains appear limited without harming product quality, service, or customer experience. Industry insiders expressed surprise at the erosion of Shufersal’s gross margins, especially given the discounts suppliers typically grant when stores convert to discount formats.

While Shufersal’s real estate operations may generate additional income, they cannot replace the need to stabilize and grow the core retail business. The key question now is whether Shufersal can revive sales growth and improve margins without resorting to price hikes that could push more customers to competitors. The company faces a dual pressure of declining turnover and shrinking operating profit, with limited room left for cost savings or price increases without risking further customer loss.