July food retail stock ranking: The giant chain that fell to the bottom
After June's drop, almost all sectors on the stock exchange recovered strongly in July. But food chains were left behind: even the winners rose only a few percent, and many remained in the red. How did the defensive advantage that protected them turn into a disadvantage?
July was a month of sharp correction on the stock exchange, but the food retail sector barely participated in it. While sectors like banking, insurance, and energy surged and erased June's losses, retail chains provided only a partial recovery.
Even the month's winners settled for meager gains: Yohananof led with an increase of only 2.94%, followed by Shufersal (2.58%). All others remained in negative territory: Tiv Taam (-0.26%), Victory (-2.81%), Carrefour (-4.69%), and Rami Levy, which closed the ranking with the sharpest decline, 5.70%.
To understand the picture, it is worth remembering the main characteristic of the industry. Food chains are considered "defensive," meaning a sector that provides a shelter in times of uncertainty, as people continue to buy food even during a recession or periods of security escalation.
But this trait works in both directions. In a month of recovery and optimism like July, investors move to "risk-on mode": they withdraw funds from stable stocks and direct them to stocks with higher growth potential, such as banks or defense stocks. The result is that the chains, which are perceived as conservative, are left behind precisely when the market is rising.
This pattern is particularly prominent in Rami Levy. In one of the interesting moves of the month, the discount chain that showed the most resilience in June, when it fell the least, became the stock that fell the most this month.
On the other hand, Yohananof and Shufersal, which suffered the sharpest declines in June, led the slight recovery. This is a softened version of the "mean reversion" phenomenon, but in the case of food, it was much weaker than in other sectors.
Beyond the rotation among investors, a more substantial burden continues to hover over the industry: pressure on profit margins. The government is promoting a series of reforms aimed at lowering the cost of living, including opening the market to imports, moves that could erode the profitability of the chains. A more competitive market is good for the consumer, but challenges the companies' bottom line, and this is exactly the fear that tempers investor enthusiasm even in a positive month.
On one hand, food chains are in investment portfolios and pension funds, so the trend affects savings, even if their impact is more moderate than other sectors. On the other hand, and perhaps more importantly, the struggle over the chains' profit margins is exactly the struggle over the prices you pay at the checkout. If regulatory pressure and competition indeed continue, it is possible that we will eventually see this in price reductions on the shelf.
In the short term, investors continue to price in a challenging environment for the industry, in which even a general market recovery is not enough to restore appetite.
