Israeli Food Retailers Navigate Post-War Demand Shift, Profitability Challenges

Following a surge in demand during the recent war period, Israeli food retail chains are now experiencing a normalization of consumer habits. However, a new analysis by IBI suggests that this moderation in sales does not necessarily signal a return to pre-war profitability levels. During the demand boom, the chains implemented long-term strategic initiatives that improved their profitability base, including better terms with suppliers, investments in technology and logistics, optimized store layouts, and increased parallel imports.

IBI's review indicates that operational profitability in the first half of 2026 is higher than in the first half of 2023 for the surveyed companies. Yet, the ability to maintain these profit margins amid moderating demand varies significantly among the chains. Growth quality is assessed by new store openings, same-store sales (SSS), and revenue per square meter. Yohananof demonstrates strong growth through SSS and expanded retail space, with revenue per square meter increasing by approximately 18% to around NIS 28,500 in H1 2026. Tiv Ta'am shows resilience with an 18% cumulative rise in revenue per square meter and positive SSS growth in the second quarter of 2026, the only company to do so.

Rami Levy maintains the highest revenue per square meter, though slightly below 2023 levels, with growth driven by expansion and diversification into pharmacy, discount retail, communications, and finance. In contrast, Shufersal and Victory are seeing a decline in revenue per square meter compared to 2023, necessitating a focus on stabilizing existing store performance to preserve profitability. Looking ahead, IBI emphasizes the importance of external growth engines and supply chain control, citing Tiv Ta'am's planned partnership in fruit and vegetable supply as an example of improving produce quality and reducing procurement costs.

Regarding stock valuations, Yohananof trades above its historical average due to proven growth quality and expansion potential. Tiv Ta'am trades below its historical average, with resilience and new growth engines potentially supporting a valuation increase. Rami Levy also trades above its historical average, benefiting from diversification, but the impact of new ventures on expansion costs needs monitoring. Shufersal and Victory trade below their historical averages, with IBI cautioning that low multiples are insufficient without stable existing store performance and profit bases, particularly noting Victory's significant reliance on volatile revenue from operations near the Gaza Strip.