My husband Max Stock: “The recession is good for us”

by time news

Max Stock makes school. The stock products company benefited from increased shopping by families in preparation for the return to school, in September. In the third quarter of 2022, sales of back-to-school products and office equipment increased by NIS 13 million (about 30%) and reached NIS 59 million.

The opening of a new branch in Kfar Saba during the quarter also contributed to the increase in sales. While most retail chains suffered from weak sales, and a decrease in profits or beyond a loss, Max Stock shows an opposite trend that can indicate something about the public’s preference for shopping. The inflation that is running high and the interest rate that continues to rise benefit the discount chains, in times when families with children prefer to reduce expenses.

Do you feel a slowdown in consumption?

Uri Max, CEO and owner of Max Stock: “The recession is good for us. In a less good time we make better numbers. People vote with their feet to come and buy better products, at cheaper prices. As the situation gets worse in the world, customers will come to us because the attractive prices attract them. We always sold our private label and did not rely on Unilever or big brands. We make our own imports, unique to us and we are not subject to the big companies. As much as we talk about price increases, people prefer to go to the discount stores.”

The company has 55 branches. At the beginning of the year, it inaugurated two new branches it owns in Nahariya and Nof HaGilil, and in the third quarter it replaced the store in Kfar Saba, which included 1,000 square meters, with a new store measuring 4,500 square meters. At the beginning of 2023, the company will open stores in Gush Etzion, Mishor Adumim and Arot Yitzhak.

The new branches had a positive effect on Max Stock’s revenues which grew in the third quarter by 15% to NIS 293 million. At the same time, sales in identity stores increased by 4%. The average basket increased in the quarter by 5% and was positively affected, among other things, by the timing of the holidays and precision in the product mix. However, in the first nine months of the year, sales in Max Stock’s identity stores decreased by 1%.

Along with the return to school, Max Stock recorded an increase of about 11% in the sales of disposable utensils, which amounted to NIS 30 million. However, the increase in one-time sales was not due to an increase in consumption, but rather to the expansion of the chain’s trading areas.

According to Max, “the increase in disposable sales is relative and is due to the opening of new branches and not an increase in consumption. There is no change in disposable sales at Sime Store. Since the tax imposed on disposable utensils, the quantities that the public buys have decreased, but sales have increased because the products are more expensive.”

Will the cancellation of the one-time tax return buyers to make purchases?

Max: “I have no doubt that after the abolition of the tax the public will return to consuming, the quantities will increase significantly and the sales accordingly.”

One of the categories that had the greatest impact on sales in the quarter was household products, whose sales grew by about 23% and reached NIS 72 million. In this category are included the furniture products that are sold in branches and their price is high compared to the items in the other categories.

During the Corona period, there were those who predicted that the stock chains would not be able to cope with the increase in freight prices from China, since they import cheap products that cost a few shekels. However, contrary to estimates, Max Stock states that the corona virus did not have a material impact on the results of the company’s operations and the chain’s stores. Also referring to inflation, the company writes that it examined the effect of the increase in the prime interest rate and the increase in the consumer price index and found that these did not materially affect the company’s results.

After stocking up on a large amount of inventory during the Corona crisis in order to reduce the impact of the disruptions in the global supply chain, from the beginning of the year the company realized the inventory it had purchased and managed to reduce it to NIS 167 million as of September 2022, compared to the NIS 200 million inventory it held in September 2021. This is how Max Stock benefited from a decrease in logistics costs thanks to the reduction of inventory volumes and improved the gross profitability which stood at 40% in the quarter compared to 38.6% in the corresponding period last year. The gross profit increased by 19% and amounted to NIS 118 million.

The realization of the inventory with which the company stocked up during the Corona period increased the cash flow from current operations to NIS 87 million compared to NIS 21 million in the corresponding period last year and since the beginning of the year the company recorded a flow from current operations of NIS 166 million compared to NIS 12 million in the corresponding quarter last year.

The company invested in advertising and marketing and the sales and marketing expenses increased in the quarter by 23% to NIS 66 million. The operating profit amounted to NIS 37 million, an increase of about 9% resulting from growth in the scope of operations and gross profitability and offset by increases in advertising and marketing expenses and expenses for opening new branches. The profit for the shareholders was NIS 19.6 million compared to NIS 17 million in the corresponding quarter, an increase of 15%. The company distributed a dividend of NIS 40 million at the beginning of September.

Last August, Max Stock announced that it entered into an agreement with Portera and will open the chain’s first stores in Portugal. These days the company is ahead Signing several branches to be opened in Portugal in the first half of the year.

Jumbo Greece is here around the corner. In January, Fox will launch the chain’s first store. are you afraid

Uri Max: “We know Jumbo in Greece. They are an amazing business. But Israel is a completely different story. Israel is different in the cost structure. To own 10,000 square meter stores like Fox plans to build, it requires a different workforce, and expensive operating costs, And this ultimately makes it difficult to give a good price to the consumer. We only have three huge stores and they are also 5,000 square meters and not 10,000 square meters. In addition, our model is different. We do not buy from a Greek supplier who imports from China, sells to us, and we sell to the consumer, but we buy just like the Greek jumbo buys the products from China. We buy from the same factories they buy, only we sell directly to the consumer and in the case of Jumbo Global, it sells to Fox and Fox will sell to the consumer. It’s another hand. That’s why we will be more attractive in price and variety, the more complex it is that you own a franchise. Already a year and a half ago I heard this question about Jumbo Greece and they still haven’t opened the store, because setting up 10,000 square meters here is not easy. So maybe they will set up one such branch, and no more. And even if they do, we will know how to handle it. We Subject to ourselves and not to one franchisee or another. Fox is subject to a franchise and they will have to adapt to the Israeli market. Another advantage of ours is that we are constantly changing the mix, constantly diversifying and changing, and in the Greek Jumbo the mix in its stores around the world does not change as frequently as in ours. So it is possible Entering the store the first and second time and having fun, but the third time it’s less interesting.”

According to Nir Dagan, the company’s CFO: “Daiso (Japanese stock products chain – AI) is much bigger than Jumbo Greece and even it did not survive in Israel. In 2018 there were articles in the media about the giant that came to Israel, and today we are in 2022 and they are not here.”

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