Super-Sol profits almost quintuple in 2005

Q4 net profit per share rose to NIS 1.63,, from NIS 0.33 one year before. Similar growth not seen in 2006 as Clubmarket costs weigh.

supersol 88 298 (photo credit: Ariel Jerozolimski)
supersol 88 298
(photo credit: Ariel Jerozolimski)
Super-Sol, the country's leading supermarket company, nearly quintupled its net profits in 2005, as sales growth strategies proved successful and the costs of absorbing Clubmarket were yet to be felt. The company said Monday that 2005 earnings came to NIS 81 million, fully 4.5 times the previous year's NIS 18m. In the fourth quarter alone, net profits jumped to NIS 33m. from NIS 7m. one year earlier. Net profit per share rose to NIS 1.63 in the fourth quarter, from NIS 0.33 one year before. Total revenue, from both retailing and property holdings, rose 9.6% to NIS 1.69 billion in the fourth quarter against NIS 1.55b. for the same period in 2004. Operating profit totaled NIS 60m., nearly double the NIS 32m. registered a year earlier. Sales, general and and administrative costs were stable at roughly NIS 400m. Per square meter, sales grew 6.3% to NIS 4,576 in the fourth quarter from NIS 4,326 a year before. "These are excellent results," said Excellence Nessuah analyst Richard Gussow, adding that despite the likelihood of poorer upcoming earnings reports reflecting the NIS 850m. purchase of Clubmarket Super-Sol shares likely wouldn't be hurt. "The market understands that there are one-time exposures related to the merger. At these price levels and outlook [the stock] is a good value," he said, noting that Excellence has rated Super-Sol shares at "buy" for the past year. Super-Sol said its profits would likely recover from the merger by the first quarter of 2007. The company's 2005 profit levels were attributed primarily to the success of Super-Sol Deal format discount supermarkets, launched in March of that year. The company has converted 25 stores into Super-Sol Deals. Gussow explained that sales at larger chains sank in the 2002 recession, as customers sought out smaller chains offering lower prices. "Super-Sol recognized what was happening and made the necessary strategic adjustments," he commented. Already the sector's leading company prior to the merger, Super-Sol, which is 57%-owned by Nochi Dankner's Discount Investment Corp., now claims a nearly 40% market share. Hoping to build on the success of the Super-Sol Deal brand, the company last month launched the new Super-Sol Big format, with one outlet so far. The company also plans to begin converting other existing stores into another new concept - neighborhood-oriented Super-Sol Sheli - early next year. The existing 157 Super-Sol outlets ultimately will be grouped into one of the three new store types, as would the Clubmarket outlets. Zol Po warehouse supermarkets, formerly of Clubmarket, would continue serving the haredi sector under their existing banner. Super-Sol is also preparing to introduce private-label brands, a customer members' club, and a Super-Sol brand credit card, said CEO Avraham Biger in a press release. Super-Sol shares rose 4.5% Monday to close at NIS 13.53 on the Tel Aviv Stock Exchange.