Supersol yesterday announced plans to shut down 18 unprofitable supermarkets and fire 480 of the chain's 8,700 employees in the first round of a restructuring program.
The reorganization plan is being orchestrated by Nochi Dankner, chairman of the IDB group that controls Supersol, Avraham Bigger, Supersol chairman, and company CEO Effie Rosenhaus. Bigger and Rosenhaus yesterday outlined the first stage of the restructuring plan, which they said would last about a year.
The plan includes measures to trim expenses by NIS 100-150 million, increase profit margins by more than NIS 100 million, and attract customers by cutting the prices of key items and improving customer service and the stores' general atmosphere.
Supersol operated in the red during the previous two quarters, but Bigger believes the company will turn a profit next year. The chain is comprised of 170 supermarkets, 50 of which are unprofitable, of which 20 are deemed to have no chance of becoming profitable.
Rosenhaus said that the 18 supermarkets to be closed were unprofitable for many reasons, "including very high objective expenses such as rent." Some of the stores are losing money due to "external competition and internal cannibalism of Supersol stores," he added.
The company's third-quarter financial statements are expected to show some NIS 60-70 million in costs related to the store closures, compensation for terminated employees, and penalties for breaking lease agreements.
Rosenhaus said that Supersol is renegotiating with all of its suppliers to cut costs. "Together, we'll apparently succeed in approving the chain's purchasing terms along the entire line of suppliers and in all categories," he said.
In particular, Supersol is seeking to cut its rental costs in shopping malls, where it pays an average of about $24 per cubic meter in rent and management fees. This compares to rental costs of just $9 per cubic meter in Power Centers.
"Some of the benefit from the efficiency measures will be passed on to the customers," Bigger said. Supersol plans to allocate NIS 50 million toward cutting the prices of key products, and will allow each store to set prices to best compete in its business environment.
Rosenhaus said the supermarket chain's multiple store format makes it difficult to promote its trademark and increases marketing costs. Supersol is working toward unifying the six types of stores its currently operates.
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