Alon Israel Oil Company Ltd. subsidiary Blue Square Israel Ltd. (NYSE: BSI; TASE: BSI) today published its financial report for the first quarter of 2009, two days after Standard & Poor's Maalot Ltd. downgraded the company's bonds. Israel's second largest supermarket chain reported lower sales, mainly due to the recession and the haredi (ultra-orthodox) boycott of the Shefa Shuk brand stores, which began in February 2008.
Blue Square posted NIS 1.76 billion ($421.4 million) revenue for the first quarter, 3.1% less than the NIS 1.82 billion revenue for the corresponding quarter of 2008. Supermarket same store sales fell 7.1%, due to the conversion of stores to the Mega Bool hard discount format. The decrease in sales was offset by the opening of eleven new stores during the 12-month period and increased sales by BEE Group compared with the corresponding quarter, and which benefited from the proximity of the Passover holiday this to the end of the first quarter.
Blue Square posted a gross profit of NIS 503.1 million ($120.1 million) for the first quarter, down from NIS 503.6 million for the corresponding quarter. However, the gross profit margin rose to 28.5% of revenue from 27.6% of revenue. The company attributed the increase in its gross profit margin to higher sales at BEE Group, which has a higher profit margin than the norm in the food retail sector. A contributing factor was the change in the sales mix and increase in the contribution of the formats characterized by higher gross profit margin at the Mega, Mega In Town, and Eden Teva Market stores compared with the hard discount formats at Mega Bool and Shefa Shuk.
Operating profit fell to NIS 62.3 million ($14.9 million) for the first quarter from NIS 88.9 million for the corresponding quarter. The operating profit margin narrowed to 3.5% of revenue for the first quarter from 4.9% of revenue for the corresponding quarter.
Blue Square's net profit was halved to NIS 32.3 million ($7.7 million) for the first quarter from NIS 65 million for the corresponding quarter. The company attributed the decline to lower operating income, higher financial expenses, and an increase in income tax expenses.
Net cash flow from operating activities NIS 30 million ($ 7.2 million) for the first quarter, compared with NIS 24.5 million for the corresponding period.
Blue Square's board decided that no dividend will be distributed for the quarter, because its ratio of financial obligations to EBITDA for the previous four quarters and it ratio of the cost of unencumbered fixed assets to financial obligations exceed the thresholds decided upon in 2003.
Blue Square president and CEO Zeev Vurembrand said, "In this quarter, we present better results considering the increasing competition and the prevailing recession due to the material strategic actions we have taken." He added, "We shall expand the houseware areas in Mega branches as well as independent stores based on products, know-how and intensity of the brands Naaman (ceramics), Wardinon (textiles), and Sheshet."
Blue Square had 199 supermarkets at the end of March, as follows: Mega In Town - 115; Mega Bool - 39; Mega - 19; Shefa Shuk - 19; Eden Teva Market - 7.
Blue Square's share rose 0.8% in premarket trading on the NYSE to $8.08. The share fell 0.5% by mid-afternoon on the TASE to NIS 31.39.
Published by Globes [online], Israel business news - www.globes-online.com - on May 25, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009