The grant Shabarkhan is asking to be approved by Shufersal’s shareholders as part of the new salary package
This special grant actually replaces the adjustment payment of 3 salaries that Abarkhan was entitled to upon his retirement from the company, as well as retirement compensation for the 10 years as CEO and the many years he previously held senior positions in the retail company. There is no doubt that it makes sense to grant Abarkhan a retirement grant after so long Many years in Shufersal, but it is strange to do this while he continues to serve as its active chairman.
The rest of Abarkhan’s salary package includes an option grant over 4 years at a total cost to the company of more than NIS 10 million, as well as a fixed monthly salary linked to an index of NIS 127.3 thousand gross, 14 recovery days and 23 vacation days per year. This is an annual cost of about NIS 2.3 million for the company. The cost of Abarkhan’s salary in the first year in office (along with the special grant and options) is expected to amount to NIS 7.3 million. In the same year, Abarkhan is expected to lead moves of cuts and layoffs wherever possible. It’s a shame he didn’t choose – even just for the purposes of a personal example – to cut back a little on his own terms as well.
Shufersal employs 16,600 people. What is the distance between them and Abarkhan? The company reports that the expected wage cost of Abarkhan is 37 times higher than the median wage cost of the other employees (including contractor employees).
The rate of decline in sales in Shufersal’s identity stores in the first half of 2022
This is a particularly dismal figure for any food chain. The sales figure in the same stores compares the sales between the stores that were open for the entire past half, compared to the sales in the exact same stores in the corresponding half. The purpose of this figure is to neutralize the effect of the new stores, which inevitably lead to growth in sales for the entire chain.
When this figure is decreasing, there can be two possible explanations for this: the first, that the food market in Israel has shrunk. The second is that Shufersal’s market share is small. The customers simply chose to enter Shufersal’s stores less, and more to the competitors’ stores. In the reports, Shufersal explained that the decrease in sales was not due to a decrease in its market share, but to the exit from the corona. In other words: in the corresponding half of 2021, the Israeli public spent much more at home, spent less on restaurants and entertainment and more on shopping at supermarkets. This is reflected in abnormal growth During the Corona, and now we are back to normal – people are back to spending time, traveling abroad, less at home and less cooking. There is no doubt that this explanation is well grounded in reality, but it is not the whole picture. Shufersal presented a series of decreasing parameters that leave no room for doubt – the chain’s market share also decreased.
The rate of decline in sales per square meter in Shufersal supermarkets in the first half of 2022
This is another figure that indicates a decrease in market share. Shufersal concluded the half with sales per square meter of NIS 12.6 thousand, compared to NIS 13.3 thousand per square meter in the previous half. As of the end of the first half, Shufersal operated 510,000 square meters of commercial space. Each square meter obliges Shufersal to incur a series of expenses – from rent to the wages of the employees who take care of this square meter, the electricity it consumes, and much more. To justify the expenses, Shufersal has to sell how many More than every square meter it operates. A decrease in sales per square meter signals fewer customers in the stores, but it is also the first swallow that foreshadows the erosion of profitability. We know that the costs of real estate, labor wages, electricity and other inputs in the State of Israel have not decreased in the last half of the year, so when Shufersal sells less for every m As long as she operates, she also earns less money.
The operating profit of the writers network in the first half of the year
This is a drop of 63.9% compared to the corresponding period. This drop was due to the decrease in the sales line. Shufersal’s food chain sales were NIS 6.7 billion in the first half, which is a 3.4% decrease compared to the corresponding half. When sales are falling, one would expect the chain to cut its expenses – but that was not the case. The sales, marketing and management expenses of Shufersal in the half were NIS 1.7 billion, an increase of 2.9% compared to the corresponding half.
Why didn’t Shufersel start cutting expenses already in the past half? When it was clear to her that the volume of sales was not what it was? There could be several reasons for this. It can be assumed that the frequent upheavals in the company’s management and the conflicts at the top thwarted managerial moves that would have required an overall view. During the half-time, Abarkhan resigned from the position of CEO due to conflicts with the chairman at the time, Yaki Vedmani. And Damani himself resigned from the post in April. Ofer Bloch took office as CEO of the company in February, but resigned in July after a murky and stormy relationship with Abarkhan, who returned to the position of chairman in June. In such an administrative environment it is difficult to lead long-term moves, and if we take into account the management atmosphere during Corona – where instructions, variants, masks and vaccines changed on a daily basis – it is possible to understand why it was very difficult to cut expenses during this period.
The sales of the Be pharmacy chain in the first half of the year
This is a phenomenal growth of 19.4%, especially unusual in the landscape of the food market which is used to growth close to the rate of population growth in Israel (about 2% per year). The problem is that the great growth of the pharmacy chain did not come with growth in the chain’s operating profit, which remained only NIS 3 million in the first half, less than 1% of sales. So it is true, this is a store chain that has been losing money for many years and it is great that Shufersal was able to turn it into a profit, but here too the new management will have to generate higher and much more stable profitability. The explanations for the stagnation in the operating profit in the past half were mainly due to the return of trips abroad. These allowed customers to spend less on cosmetics and perfumes in Israel and spend more in duty free and in the countries of the world. Since we do not foresee the closing of the sky soon (tap tap) they will also have to adjust their expenses here to the new reality .
Shufersal’s operating profitability in the first half of 2022
The decrease in sales and the increase in expenses amounted to the fact that Shufersal’s operating profit in the half was only 1.5% of sales. From Shufersal’s point of view, this is an intolerable figure, when the chain’s profitability should range from 4% to 5% of the revenue. Therefore, it is very likely to assume that in the coming months Shufercell will make aggressive moves to regain market share and cut expenses, in order to restore operating profitability in the coming quarters. In order to do this, it will have to turn over every stone – whether in the efficiency of personnel, in the sales prices it receives from the suppliers, in the rents for the branches, in the marketing expenses and more.
The percentage of sales of private label products out of the total sales was halved
“Adaptation period”, Abarkhan version
“Adjustment period” when it is referred to in the context of senior salaries is actually a washed-up concept for an additional retirement grant. But what happens if the CEO who retired and received a grant “to adapt to the life after” returned during the adjustment period to the position of chairman in a company like Abarkhan? After all, he did not really begin to adapt to life outside the company and even according to Shufersel herself, the employee-employer relationship between them did not come to an end.
But according to Abarkhan’s method, his agreement to give up three months of salary from that adjustment period, not only justified but even worthy of special mention, is also accompanied by a “tiny” grant of NIS 2.5 million – an amount that is higher than the balance of the adjustment grant he would have received, if he had not generously given it up Much.
The cost of Abarkhan’s salary in the first year in office (along with the special grant and options) is expected to amount to NIS 7.3 million. When in that very year Abarkhan is expected to lead moves of cuts and cost reductions wherever possible