Blue Square Israel moves to loss in Q4

JERUSALEM - Blue Square-Israel, one of Israel's largest retailers, said on today it moved to a loss in the fourth quarter due to declining sales and write-downs as a result of the domestic recession and increased competition.

Blue Square, Israel's second largest supermarket chain, posted a net loss -- after charges -- of 99.2 million shekels ($20.95 million), or 2.58 shekels per American depositary share, compared with net income of 29.3 million shekels, or 0.76 shekel per ADS, in the fourth quarter of 2001.

Revenues fell eight percent to 1.33 billion shekels from 1.44 billion shekels.
Blue Square said its same store sales for the fourth quarter fell 11.7 percent, citing the recession. The fall was compounded by the effect of "hard discount stores" or cheaper and larger outlets opened by the company and its competitors.
Blue Square said it recorded a charge of 161 million shekels before taxes in the fourth quarter, largely due to the effect of Israel's recession on the value of some of its assets and provisions related to the closure of underperforming stores.

"The substantial write-downs taken during the fourth quarter reflect the economic consequences of a market plagued by ongoing recession and two years of the difficult security situation," President and Chief Executive Yoram Dar said in a statement. "This has...brought about a market-wide consumer shift towards hard discount formats, impairing the value of some of our assets," he said. "However, given our profits from the first three quarters, we were able to absorb the charge and post a small profit for the year."

For all of 2002, Blue Square recorded net profit of 7.4 million shekels, or 0.19 shekel per ADS, compared with net income of 153.7 million shekels, 4.0 shekels per ADS, in 2001.

Sales last year slipped 6.6 percent to 5.5 billion shekels.

Blue Square's shares were 3.8 percent lower at 35.67 shekels after it issued its results, underperforming a 1.7 percent drop on the broader Tel Aviv bourse.
Its chief rival, Super-Sol was down 1.5 percent. Super-Sol, the country's largest supermarket chain, last week posted a fourth-quarter net loss of 118 million shekels, compared with a net profit of 54 million shekels in the same period in 2001.

Dar noted Blue Square plans to restrain its expansion rate even though it slowed revenue growth.

The company will continue to improve efficiency in 2003 through streamlining its workforce, increasing private label sales, closing underperforming stores (it closed three in the fourth quarter) and focusing more on hard discount stores, he said.

"Even in today's challenging environment we are confident that we can continue building market share, improving our revenues and further reducing our expenses," Dar said.
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