| Shira Ahiez, Retail Analyst, IBI Investment House
The main story in the recent financial statements concerns a return to a relatively routine demand environment after the Corona days, when compared to the corresponding quarter, all food marketing in Israel showed a decrease in sales data in identity stores (SSS) along with an erosion in retail operating margin.
In our estimation at IBI, strong comparison data under the auspices of the corona that characterized the corresponding period, including the third closure and increase in flights abroad alongside the timing of Passover, significantly clouded the revenue line of food marketing chains in the first quarter of the year.
Thus, all companies in the sector showed a decrease in the SSS data, which ranged from 6.82% (Rami Levy (TASE 🙂 – retail sector) to about 13% (TASE :). Meanwhile, we note that according to Sterncast data, the consumer goods market showed a decline of 4.5% in the first quarter of 2022 (compared to the corresponding period).
However, expansion in commercial areas alongside expansion moves in areas tangent to traditional food activity (such as Shufersal expansion (TASE 🙂 in the pharma sector) have helped food marketing chains offset some of the erosion in SSS data.
In this context, it should be noted that the only two players that managed to show growth in the revenue line in the quarter are Yochananoff (in light of accelerated branch opening and acquisition of the “Cheap Stock” chain) and Rami Levy (mainly thanks to Good Pharm’s wholesale activity in the field of corona testing).
The average gross profit in the food chains industry amounted to 26.9% in the quarter, with most food marketing chains showing a decrease in the profit margin (compared to the corresponding period). This, in addition to Victory (TASE 🙂 which recorded stability in this parameter, and Yochannoff (TASE 🙂 which showed an improvement that resulted, in our opinion, due to efficiencies in the inventory field, entry into the private label, improvement in trade agreements due to network expansion and high gross margin. Stock “.
The average operating profit in the industry amounted to 4.8% in the quarter. We estimate that the erosion in SSS data in the quarter along with the increase in inputs (such as wages, electricity, property taxes and transportation) as well as the decrease in the said gross margin, led to a decrease in the operating margin of almost all food retailers. This, in addition to Rami Levy (TASE :), which recorded an improvement in profit margins, mainly thanks to Good Pharm’s wholesale activity in the field of corona testing, which was responsible for an operating profit of NIS 49 million – a profit even higher than the retail activity of all Rami Levy branches. In the first quarter.
The author is a retail analyst at IBI Investment House. The review is based on information published to the general public by the companies reviewed in it, as well as on assessments and estimates and other information that the IBI investment house assumes to be reliable, without conducting independent tests in relation to the information. IBI, the reviewers and its editors are not responsible for the reliability of the information, its completeness, the accuracy of the data contained in it or any omission, error or other defect in it. This review does not constitute investment advice and does not constitute an invitation to purchase or an order to sell the securities mentioned in it. Therefore, the information contained therein should not be relied upon and does not replace independent judgment and obtaining professional advice that takes into account the data and special needs of each person. IBI Investment House, its employees and members of its Board of Directors may hold the securities and / or financial assets described in the review.