The hard work of brothers Yossi and Shlomi Amir since they became the controlling shareholders in retail chain Shufersal (TASE: SAE) is starting to show. The largest chain of supermarkets in Israel posted a 153% rise in its net profit for the second quarter, to NIS 169 million. During the quarter, the Amir brothers began a round of cutbacks at management level, and took the reins of the day to day running of the company.
Shufersal's Financial Performance: A Look at the Numbers
Shufersal’s second quarter revenue rose 8% to almost NIS 4 billion. The gross profit margin rose to 27.8%, from 26.8% in the corresponding quarter of 2023. Operating profit totaled NIS 470 million, representing a 45% year-on-year increase. The increase was partly attributable to gains on revaluation of real estate assets and the sale of non-financial assets amounting to NIS 9 million. Operating profit as a percentage of sales rose to 6%, from 4.4% in the corresponding quarter.
Improved Performance: Signs of a Turnaround
There are several indications, besides the second quarter results, of improved performance at the chain. One of the most important ones is same store sales in the first half of this year, which were 5.5% higher than in the same period last year.
Online Sales and Private Brand Performance
The growth in sales at the stores led to online sales becoming a lower proportion of total sales, declining from 18.2% in the first half of 2023 to 17.5% in the first half of 2024. The proportion of sales of Shufersal’s own brand also declined between the two periods, from 27.5% to 26.2%. This is apparently a result of the Amir brothers’ decision to weaken the chain’s own brand and improve terms of trade with other suppliers.
The Amir Brothers: Taking Control and Driving Change
The Amir brothers completed their takeover of Shufersal in February this year, when they bought a 24.99% stake. Formally, they are not the controlling shareholders, but no-one has a larger holding than them. They bought part of the financial institutions’ holdings in the chain, and, after a dispute with the Israel Securities Authority, decided to take upon themselves all the obligations of controlling shareholders.
Profitable Move
The move has already proved profitable for the brothers. They paid NIS 1.5 billion for their shares, which were worth NIS 1.76 billion before this morning’s opening on the Tel Aviv Stock Exchange. Following the release of the second quarter results, Shufersal’s share price is up by more than 9.5% in today’s session. In the context of the acquisition deal, the Amir brothers also paid Paz NIS 100 million to end their non-compete agreement with it, made when they sold the Freshmarket chain that they founded to Paz several years ago.
The Future of Shufersal: What's Next for the Retail Giant?
The impressive turnaround at Shufersal under the leadership of the Amir brothers has raised eyebrows in the retail sector. Their aggressive strategy, marked by cost-cutting, strategic partnerships, and a renewed focus on customer experience, has yielded remarkable results. As they navigate the dynamic landscape of Israeli retail, the question on everyone's mind is: can they sustain this momentum and establish Shufersal as a dominant player in the long term? Only time will tell. However, one thing is certain: the Amir brothers have injected a new wave of energy and innovation into Shufersal, setting the stage for an exciting chapter in the company's history.
The success of Shufersal under the Amir brothers' leadership provides a valuable case study for businesses looking to adapt to changing market conditions and achieve sustained growth. Their strategies, from streamlining operations to building strong supplier relationships, offer insights that can be applied across diverse industries.
