Israeli cafe and supermarket chain Cofix Group Ltd. (TASE: CFX), controlled by Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI), is still facing an uphill struggle. Led by CEO Iram Graiver, Cofix yesterday reported its results for the second quarter and first half of 2019. Second quarter revenue totaled NIS 68 million, 8% less than in the second quarter of 2018. Revenue from cafes totaled NIS 18 million, a full 21% less than in the corresponding quarter last year, while revenue from supermarkets was down 2% to NIS 50 million.
Cofix posted a NIS 4.2 million operating loss in the quarter, compared with a NIS 2.7 million operating loss on the corresponding quarter in 2018, and a NIS 6 million net loss, six times its net loss on the second quarter of last year.
Cofix founded in 2013 by entrepreneur Avi Katz with the idea of offering a uniform NIS 5 price for all of its products, has experienced a drop in its business for the past three years. At the end of June, the chain had 106 cafes in Israel (under its Urban Cofix subsidiary), 88 cafes through franchise holders, and operated the rest of its cafes by itself. The chain closed down 10 money-losing cafes in the first half of the year. Cofix also operates 31 supermarkets through its Super Cofix subsidiary, compared with 30 at the end of 2018. The chain is also a partner in and operates through franchise holders 140 cafes in Russia, mainly in the Moscow area.
The Rami Levy retail chain currently holds 50.4% of Cofix's shares, after become the controlling shareholder in the group last September, leading to a subsequent improvement in Cofix's terms of trade.
The only positive element in Cofix's reports was an increase in its gross profit margin from 24% in the second quarter of 2018 to 26% in the second quarter of this year.
Rami Levy's entry in to the company also reduced the operational loss of its cafes (before pre-set-up costs and other expenses) from NIS 2.9 million in the second quarter last year to NIS 1.7 million in the second quarter of this year. Supermarket business, on the other hand, made a NIS 1 million loss, compared with a NIS 236,000 profit in the corresponding quarter last year.
Cofix's revenue in the first half of 2019 totaled NIS 137 million, 8% less than in the first half of 2018. The company posted a NIS 7.4 million operating loss in the first half of this year, compared with an NIS 8.1 million operating loss in the corresponding period last year, and its NIS 10.2 million net loss in the first half was more than double its net loss in the first half of last year.
The Cofix Group's poor business results caused a 32% drop in its share price over the past year, cutting the company's market cap to NIS 124 million. The share price has fallen 30% since Rami Levy invested in the company.
Commenting on his company's reports, Graiver said, "We substantially improved the gross profit margin in the first half of 2019, compared with the corresponding period last year, after taking a number of streamlining and restructuring measures in both the supermarket chain and the cafes. We intend to reproduce the success of the first supermarket recently opened in Herzliya on the Rami Levy in the Neighborhood format, and we will open 20 more supermarkets under the Rami Levy in the Neighborhood brand name in the coming years."
Published by Globes, Israel business news - en.globes.co.il - on August 22, 2019
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