Shufersal Reports 34.5% Drop in Quarterly Profit Amid Sales Decline and Stock Plunge

Shufersal, Israel's leading food and pharmacy retailer controlled by brothers Yossi and Shlomi Amir, reported a weak second quarter with declines in both revenue and profits. Following the earnings release, the company's stock fell over 8% on the Tel Aviv Stock Exchange. Same-store sales per square meter dropped 8.7% in Q2, continuing a trend seen in competitors Carrefour and Rami Levy, contrasting with Tiv Taam which posted a near 1% increase. The timing of Passover impacted results, as the holiday fell in early April this year, shifting related sales to Q1, whereas last year Passover occurred mid-April and sales were recorded in Q2. However, Shufersal's sales decline is also attributed to customer losses to competitors, with a 2.7% drop in same-store sales per square meter in the first half of the year compared to the previous year.

Quarterly revenues fell 7.5% to 3.4 billion shekels. The company cited the renovation of 30 stores converting them to the "Universe" format and the closure of all food and pharmacy stores on Saturday nights as factors contributing to lost sales. Online sales also declined, with the online sales share dropping to 17.4% in Q2 from 17.6% a year earlier, and a more pronounced half-year decline from 18.7% to 17.5%. Shufersal is pursuing efficiency measures, including pressuring suppliers and deciding to import chilled meat directly for its private label, ending its relationship with main supplier Baladi.

Despite these efforts, gross profit margin fell to 29.3% from 30.1% in the prior year quarter, with gross profit down 10.2% to 999 million shekels, attributed to rising input costs. Operating profit dropped 36%, with its margin shrinking to 5% from 7.2%. Net profit for the quarter was 125 million shekels, a 34.5% decrease compared to last year. The company announced a dividend distribution of 180 million shekels.