Shufersal profit jumps 370%, bolstered by price hikes, strong food demand amid war
Supermarket chain earns NIS 238m in the July to September period, when many Israelis didn’t travel abroad due to the absence of foreign carriers and stocked up on food items
Sharon Wrobel is a tech reporter for The Times of Israel.
Shufersal saw its quarterly profit surge about 370 percent as Israel’s largest supermarket chain benefited from price increases and strong demand for groceries as more Israelis stayed in the country over the summer season amid the year-long war with the Hamas terror group.
Shufersal reported a net profit of NIS 238 million ($65 million) in the July to September quarter, up from the NIS 51 million ($14 million) earned a year earlier. The supermarket chain’s gross profit margin in the third quarter increased to 28.5% from 26.2% in the corresponding quarter. Revenue jumped 6.3% to NIS 1.4 billion ($384 million) in the reported quarter, and same-store sales grew 6.5% year-on-year.
The sharp increase in quarterly profit comes as Shufersal introduced cutbacks and efficiency measures to curtail expenses and benefited from more Israelis going grocery shopping. Many Israelis were stranded at home during the summer season and Jewish holidays as foreign airlines halted their services to and from the country during the ongoing war.
“The sharp decline in foreign airlines flying to and from Israel during the normally busy summer travel season and Jewish holidays in September left many consumers stuck at home, which bolstered demand for buying basic food items,” Shira Achiaz, retail analyst at IBI Investment House told The Times of Israel.
Foreign airlines have canceled and resumed flights to and from Israel since October 7 last year when the war in Gaza began with Hamas’s brutal onslaught on southern communities in which thousands of terrorists murdered some 1,200 people, mostly civilians, and took 251 hostages.
In recent months, US airlines completely stopped flying to Israel amid heightened fighting between Israel and Iran-backed Hezbollah in southern Lebanon, and spiraling tensions in the Middle East. Meanwhile, most European carriers extended flight suspensions to and from Tel Aviv until the end of March next year.
Furthermore, Israeli food suppliers raised prices this year, citing higher operational costs, including electricity, water, and municipal taxes.
“As the focus of public debate in Israel is concentrated primarily on the war, food retailers feel more comfortable to raise prices as operational expenses have increased,” said Achiaz. “We estimate that fast-moving consumer goods, which include food and cleaning products, have on average increased by about 5% this year.”
Shufersal is among the top three supermarket chains that account for over half of the Israeli food retail market. The high concentration in the Israeli food sector is limiting competition, putting upward pressure on prices, and raising the cost of living in the country. Shufersal operates 431 branches and employs over 15,000 workers, who serve 2.1 million customer club members.
The high level of market concentration in the food sector comes with a steep cost to consumers, who are struggling to make ends meet as the economy is getting battered due to the ongoing war.
Israel’s cost of living is one of the highest among countries in the OECD, which has been generally attributed to a lack of competition among local importers and manufacturers, who are therefore able to raise prices, alongside import restrictions that keep out international firms.
Food and beverage prices in Israel are 52% higher than the average among developed countries, second only to South Korea, according to comparative consumer price data by the Organization for Economic Cooperation and Development (OECD).
Prices for bread and grains in Israel are among the highest in OECD countries, at 49% above the average, with only Swiss prices coming in higher. Israeli prices for dairy and eggs were the second most expensive among the 38 OECD countries, at 64% more expensive than the average.
Times of Israel staff contributed to this report.
