Recession, competition cut into Shufersal Q2 profit

The supermarket chain relied on an aggressive pricing policy.

The recession was felt in IDB Holding Corp. Ltd. (TASE:IDBH) unit Shufersal Ltd.'s (TASE:SAE;Pink Sheets:SSLTF) second quarter financial report, published today. Israel's largest supermarket chain saw its net profit slip on flat revenue, but it will distribute a NIS 150 million dividend.

Shufersal posted NIS 2.87 billion revenue for the second quarter, the same as for the corresponding quarter of last year. Retail revenue was also unchanged at NIS 2.77 billion. Same-store revenue fell 2.1%.

The tough competition in the supermarket sector and the need for aggressive discounts cut Shufersal's gross profit margin to 25.8% for the second quarter from 26.8% for the corresponding quarter. Operating profit fell 30% to NIS 133 million for the second quarter from NIS 191 million for the corresponding quarter, and the operating profit margin slipped to 4.8% from 5.7%.

Net profit fell 5% to NIS 96 million for the second quarter from NIS 101 million for the corresponding quarter.

Shufersal attributed the drop in profit to "the slowdown in economic activity and rising competition in the food retail business during the second quarter of 2009. Passover sales were stronger than in the corresponding quarter of last year, compared with this year, because of the timing of the holiday."

Standard & Poor's Maalot Ltd. gave Shufersal's pending bond issue an AA rating with a "Stable" outlook. The company plans to raise NIS 500 million and will use proceeds to recycle NIS 180 million in existing debt, and make NIS 300 million in new investment. Maalot expects no change in the bond rating or outlook upgrade in the near and mid-term.

Shufersal's share rose 1.2% at the opening today to NIS 15.20.

Published by Globes [online], Israel business news - - on July 28, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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