Shufersal Faces Declining Sales and Profitability Amid Limited Efficiency Gains
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Shufersal reported a sharp decline in sales and profitability in Q2, with identical store sales down 8.5% and operating profit falling 43.5%. Despite prior cost-cutting efforts, the chain struggles to improve margins without raising prices, risking further customer loss in Israel’s price-sensitive market. The company’s stock dropped 7.3% following the report, highlighting the challenge of balancing growth and profitability.
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- Shufersal’s identical store sales fell 8.5% and operating profit dropped 43.5% in Q2 2026.
- Gross profitability declined to 28.9%, and cash flow fell 71% to 72 million shekels.
- The Amir brothers took control in early 2024 amid initially rising sales, now reversed.
- Significant cost-cutting measures have limited further efficiency gains without harming service.
- Price increases needed to improve margins risk driving away price-sensitive Israeli consumers.
- Real estate income helps but cannot replace the need to stabilize core retail operations.
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.
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