The reporting season for the third quarter, which has come to an end, provides another glimpse of the food companies in the era of inflation and interest rate increases, when the price increases in the economy were reflected in the results of the expensive chain Tiv Taam – the only one among the large chains that recorded a decrease in revenues.
While Victory recorded a 1.9% increase in revenue compared to the same quarter last year, Shufersal recorded a minor increase of 0.2% in revenue, Yohananoff recorded a 4.1% increase, Rami Levy led with a 7.8% increase in revenue, while Tiv Taam concluded the period with a 4% decrease. However, Tiv Taam actually canceled out the increase in net profit among the chains, with Shufersal being the only one among them to show a 2.5% decrease in the bottom line compared to the same period last year with a loss of NIS 96 million.
Victory posted a net profit of NIS 11.6 million, Tiv Taam concluded the period with a profit of NIS 12.4 million, Yohannoff posted a profit of NIS 32.5 million in the quarter and Rami Levy posted a profit of NIS 26.6 million in the third quarter.
“Food retailing is in the midst of a challenging period that includes an increase in a variety of inputs along with a real decrease in demand that is mainly due to price increases, all of this along with our assessment of an increase in the level of competition,” according to Shira Ahiez, retail analyst, IBI Investment House. “In addition, we estimate that the price increases in the industry and the current macro environment are expected to continue and lead consumers to a certain reduction of the shopping basket at the supermarket.”
According to IBI processing of Storenext data, the consumer goods market showed an increase of 3.6% in the third quarter of 2022 (compared to the same period), this is mainly thanks to the month of September, which registered a nice growth of 8.4%. According to Ahiez, “the timing of the Tishrei holidays and the mix of trading days supported to some extent the growth in revenues, apart from the Tiv Taam chain which benefited from increased sales days in the corresponding period and therefore showed a decrease in the top line. However, a significant increase in the volume of flights abroad offset part of the growth in the sector.
“Expansion in trading areas along with expansion in the areas tangential to the traditional food activity (such as Yohannoff’s expansion in the stock sector) helped the growth of the food marketing chains, where it is worth noting the Rami Levy chain which presented the highest growth rate (both in revenue and in the SSS data), which in our estimation is supported Thanks to the chain’s low price strategy during the days of price increases. While a mixed trend was recorded in terms of gross profitability, all food marketing chains showed erosion in the operational aspect due to an increase in inputs (such as electricity) as a result of, among other things, an increase in inflation. Thus, the average gross profitability in the industry amounted to approx. 27% in the quarter (similar to the corresponding period) and the average operating profitability decreased to the level of 4.6% in the quarter (compared to 5.6% at the same time).
We will also note that during the third quarter, Shufersal, the largest retail chain in Israel, presented a significant net loss of 96 million NIS against the background of the launch of the chain’s new efficiency plan, which entailed 170 million NIS expenses in the quarter due to reductions as a result of branch closures.