Retail giant Shufersal Reports Sales Decline in Q1 2025 Despite Surge in Profitability

Retail giant Shufersal reported a notable decline in sales for the first quarter of 2025, despite seasonal tailwinds from the Passover holiday and widespread price hikes in the retail sector. However, the company managed to post a sharp rise in profitability, reflecting deep cost-cutting and operational efficiency improvements.

According to its quarterly report, Shufersal’s revenues fell by 6.8% year-over-year, reaching NIS 3.52 billion. Same-store sales, a key industry metric, dropped by 8.1% to NIS 3.46 billion, while sales per square meter decreased by 6%, reaching NIS 5,969.

The company attributed the decline to its strategic focus on profitability, stating that the drop was driven by “the continued implementation of the group’s strategy to focus commercial and marketing activities to improve the profitability of the retail sector, alongside external influences.”

Strategic Shifts Behind the Decline

Shufersal noted that the quarter was marked by reduced consumer spending, the easing of the war, labor shortages, and rising input costs, particularly due to an increase in the minimum wage.

Online sales also declined, accounting for 19.8% of total revenue, down from 20.7% in the same quarter last year. The company’s private label products dropped to 19.6% of sales, compared to 24% in Q1 2024. In contrast, wholesale operations grew by 9.7%, totaling NIS 202 million.

Profitability Soars on  Efficiency Gains

Despite the revenue downturn, gross profit increased by 1.9% to NIS 1.05 billion, driven by efficiency measures and improved procurement practices. As a result, gross profit margin surged to 29.7%, up from 27.1% last year — an unusually high figure for the retail sector.

Shufersal cited multiple efficiency initiatives, including:

• Closing unprofitable branches

• Adjusting operating hours, including ending Saturday evening operations

• Reducing goods depreciation

• Rebranding private label items under different brand names

These steps helped reduce selling, marketing, administrative, and general expenses by 5.2%, bringing them down to NIS 817 million. As a result, operating profit jumped by 39.4% to NIS 230 million, representing 6.5% of sales, compared to 4.4% a year earlier.

Net Profit Soars as Financing Costs Drop

A 39.6% decline in financing expenses, to NIS 32 million, further boosted the bottom line. Net profit skyrocketed by 76.4% to NIS 157 million.

Looking ahead, Shufersal plans to convert 21 more stores to its Discount Universe format by year’s end. The move is aimed at curbing customer migration to low-cost competitors like Osher Ad.