Shufersal's profit plunges 31% due to Passover timing

Shufersal, the largest food and consumer group in Israel, published its reports for the second quarter of 2026, recording a 7.5% decrease in revenue to 3.4 billion shekels, compared to 3.7 billion in the same quarter last year. Net profit plunged by 31% to 135 million shekels.

The primary reason for these results is not operational deterioration but timing: in 2026, Passover fell at the beginning of April. Consequently, the entire wave of holiday-related sales was included in the first quarter, whereas in 2025, the impact was divided between the two quarters.

The bottom line for the quarter appears dramatic: operating profit fell by 36% to 170 million shekels, and EBITDA was cut by 22.8% to 395 million shekels. However, these figures hide an accounting-seasonal distortion. When holiday sales shift to a previous quarter, the second quarter remains exposed to fixed costs without the corresponding revenue, leading to margin erosion. Therefore, the 8.5% decrease in same-store sales is not fully representative.

Beyond the timing of Passover, Shufersal notes the moderation of the "Lion's Roar" operation, the closure of loss-making branches, investments in branch upgrades, and rising input costs—specifically wage increases and the higher cost of employing foreign workers amid labor shortages.

Looking at the first half as a whole, which neutralizes holiday timing distortions, revenue decreased by only 1.6% to 7.1 billion shekels, and net profit fell by 12.2% to 310 million shekels. Same-store sales decreased by 2.7%, compared to a sharp 8.6% drop in the same period last year, indicating that the rate of deterioration has moderated. The gross profit rate for the half rose slightly to 30%, a sign that efficiency measures are curbing cost pressures.

Another prominent trend is the growth of private label products, which accounted for 20.4% of sales in the half, compared to 17.8% last year. This serves as a vital profitability engine, as private label products typically carry higher margins.

In terms of financial resilience, Shufersal remains well-positioned: equity stands at approximately 4.15 billion shekels, the company holds net cash of about 84 million shekels, and Maalot reaffirmed an ilAA rating with a stable outlook in July. Against this backdrop, the board of directors decided to distribute a dividend of 180 million shekels, payable on October 1.

The report also highlights a working capital deficit of approximately 813 million shekels. The board states there is no liquidity issue, relying on positive cash flow, 400 million shekels in unused credit lines, and significant unencumbered real estate assets.

For Shufersal shareholders (market cap approximately 11.33 billion shekels), the weak quarter is primarily seasonal noise. The real risks lie in continued pressure on wage costs and shrinking private consumption. While stable dividends and a high rating signal confidence, the erosion of margins over time will determine whether Shufersal can successfully convert efficiency gains into profitable growth.