A temporary attachment action was filed against the Cost 365 supermarket chain on Thursday, by a maintenance firm saying it is owed money for services provided to the Israeli food retailer.
Cost 365 is owned by Hamashbir 365 Holdings, among whose other businesses include the Hamashbir department stores. Cost 365 is due to be sold to a group of investors, including its CEO.
The attachment request, for up to 190,000 shekels ($49,900) in assets, follows the filing about two weeks earlier of a lawsuit on the claim by Super Sherut Ve’ahzaka, which said it had been providing cleaning staff, cashiers and other staff on an outsourced basis to Cost 365, but had not been paid for services provided in July and August.
The attachment action was filed following reports last week that Hamashbir’s controlling shareholder, Rami Shavit, is selling the discount supermarket chain to a company owned by the food retailer’s CEO, Nissim Hassan, and to other investors for at least 25 million shekels.
The sale of the chain is seen as an acknowledgement that Shavit’s foray into the food retailing business,which began two years ago – initially with the opening of two discount supermarket locations – was a failure.
Last week, the Globes financial daily reported that Cost 365 was not paying other suppliers in a timely fashion.
In its attachment action, Super Sherut raised concerns that if assets to satisfy its claim were not attached, Cost 365 could “eliminate its [own] assets and stash them away by selling them to various investors.” The outsourcing firm stated that, therefore, it could not wait for the court to issue a judgment in its favor on the lawsuit. The attachment action was also justified due to Cost 365’s poor financial condition and by the food retailer’s attempts to evade payment, Super Sherut claimed.
Cost 365’s concept was to provide two prices for each item on its shelves – one for the general public, and a lower price for club members. The branches were slated to be the same size and have the same appearance, in an effort to curb operating costs. The launch, at the end of 2012, pitted Cost 365 against major players in the sector, Super-Sol and Mega, and discounters such as Rami Levy and the Victory supermarket chain.
Shavit initially declared that his plan was to have 30 Cost 365 branches up and running by mid-2013, but it was soon clear he would not meet that target. Sources at Hamashbir claimed the slower expansion pace was due to construction delays and other complications, but that the chain would continue to expand. Even two months ago, the retailer was projecting that it would have 20 locations, including existing branches in Kfar Sava, Afula, Petah Tikva and Carmiel. Four stores were expected to open by the end of 2014, the retailer said at the time.
“Rami Shavit’s idea for a supermarket chain tied to Hamashbir was good, and it could have been successful if only the chain had been set up 10 years ago and not two years ago,” said Tamir Ben-Shahar, from the Czamanski Ben-Shahar consulting firm. “It simply came to market a decade too late,” after the growth of other chains such as Rami Levy, Victory, Kimat Hinam, Yeinot Bitan and Osher-Ad. “When you come late to the market,” he added, “and start opening store after store without major purchasing power, and position yourself opposite branches of successful chains, it’s like a carpentry shop opening opposite IKEA.”
Associates of Shavit urged that he not be harshly judged, however, noting that when the time came to actually open the first Cost 365 stores, he opened a small number of them to test their economic viability. He is getting out of the venture, they added, with reported losses of about 35 million shekels.