Super-Sol, Israel’s biggest supermarket chain, may have shown increased profitability in its latest financial reports, but the company is actually cutting its prices, according to its CEO, Itzik Abercohen.
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“We’re lowering prices because we have no choice, “ Abercohen told TheMarker.
According to Abercohen, the company continually cut prices in the past few months.
“We want to be relevant and to succeed in this aggressive market,” he said by way of explanation.
Super-Sol released its fourth-quarter financial reports on Wednesday, disclosing a 39 percent rise in quarterly net profit due to higher sales and an increase in the value of the company’s real estate for investment.
According to a survey by Nielsen published this week, prices at Israeli supermarkets actually rose 3% in 2013.
“Regarding the price increases in the sector, I suggest turning to the government and to suppliers, not to us,” he said. “The suppliers raised prices, VAT increased, and we’re not responsible for that,” he said.
He declined to explain why Super-Sol raised its prices even before it started buying from its suppliers at higher prices.
Super-Sol posted fourth-quarter net profit of 78 million shekels ($22 million), up from 56 million shekels a year earlier.
Revenue rose 4.1% to 2.9 billion shekels. Same-store sales grew 2.9% in the quarter from a year ago.
The company said that during 2013, and especially in the fourth quarter, it reinforced its discount branches, a move that will continue into 2014.
The company faces tough competition from private discount supermarkets including Rami Levi Shivuk Hashikma, Victory and Osher Ad. The market share of the country’s biggest supermarket chains – Super-Sol, Mega and Co-op Israel – declined to 45% in the last quarter of 2013, from 47% in the first quarter of the year. The trend continued in January, as sales at the big supermarket chains dropped 3.2%.
Abercohen defended Super-Sol, saying that the company’s market share had dropped primarily because the private supermarkets had opened many new branches in the past several months.
“We’ll see how these [new] stores are doing in a few years,” he said.
With reporting from Reuters.