It has been two years since supermarket chain Shufersal acquired the New Pharm chain from Hamashbir Lazarchan for NIS 126 million, and then proceeded to upgrade and rebrand the chain's branches under the Be brand. Shufersal will begin closing money-losing Be branches in 2020, sources inform "Globes." As far as is known, five branches will be closed in the coming years in order to offload poor money-losing locations. The measure will reduce the Be chain's revenue, but contribute to its profit.
It is probable that the branches to be closed will be those in inferior locations operated by New Pharm when it was owned by Hamashbir Lazarchan. Shufersal therefore refrained from substantial investment in them following the acquisition; only the signs were changed, and no extensive renovations were carried out. In contrast to branches of market leader Super-Pharm, which has consistently selected strategic locations, and became an anchor in many commercial centers, New Pharm compromised on poor locations, in some of which it consistently lost money.
Last month marked a full year since the Be chain was launched and two years since the acquisition. 20 new branches were added during this period to the chain's previous 63 branches. Be CEO Ori Watermann told "Globes" in April 2019 that the chain was slated to finish 2019 with 95 branches. Last week, in its third quarter report, Shufersal reported that Be had 83 branches. Be is still a weight on Shufersal, whose operating losses from this activity are mounting and nearing NIS 100 million in less than two years.
New Pharm was up for sale for a long time, and reported bad results until it was sold to Shufersal. Shufersal's pockets are deeper than those of Hamashbir Lazarchn, but the chain's financial results before the acquisition, which included operating profits that were either a few million shekels or negative, pose a clear challenge even for Shufersal. Sources in the sector are still skeptical about Shufersal's prediction that Be will make a profit by late 2020.
Following the release of the company's results, Shufersal chairman Mauricio Wior declared his confidence in the chain, saying, "Although it hampers us and detracts from our profit in the short term, it will be one of our future growth engines, and we're investing in it, and are optimistic about the future."
The company made no response to the report.
Published by Globes, Israel business news - en.globes.co.il - on December 3, 2019
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