Max Stock: Direct Sourcing, the DC, and Whether the Margin Edge Is Truly Structural

What This Follow-Up Is Isolating

The main article argued that 2025 was Max Stock's margin proof year. This continuation strips that claim down to the engine underneath it: how much of the improvement comes from something the company built for itself, deeper direct sourcing plus a distribution center that lets it manage the supply chain more tightly, and how much simply came from a weaker dollar and lower freight costs after an unusually disrupted period.

The short answer: there is a real structural edge here, but it would be too aggressive to read all of 2025's margin expansion as if it were already locked in for the next few years. The DC and the heavier direct-import model are changing the economics of the merchandise base. At the same time, 2025 also had meaningful external help. That distinction matters because a reader who attributes all of the gain to a permanent competitive advantage is likely over-reading the year, while a reader who dismisses the whole move as cyclical noise is missing a sourcing engine that is already working.

Four sharp takeaways stand out:

• The DC did not push logistics costs lower as a share of revenue. It pushed them up to 7.0%. That actually strengthens the structural read, because it means Max Stock is pulling more of the chain in-house and still widening gross margin.
• 2025 was not a clean laboratory year. The company itself attributes the gross-margin expansion not only to direct import and better trade terms, but also to a weaker dollar and lower freight costs.
• The 36% concentration with one China supplier looks stark, but it is concentration at the Trader level, not necessarily at a single factory. That softens the binary risk, but it still leaves a meaningful operational hub.
• The edge is not free. Inventory days rose to 103, and only part of that pressure was offset by supplier-credit days extending to 86.

What Already Looks Structural

The most important data point here is not the end-margin figure by itself, but the way Max Stock is building its merchandise base. Around 70% of product sourcing is already imported, and the annual report describes roughly 70% of products as finished goods purchased directly from suppliers abroad, mostly in the Far East. At the same time, management says the long-term goal is to raise the share of products that the company imports itself, or via dedicated import for its benefit, to roughly 85% of all products sold in stores.

This is the core of the story. Max Stock is not simply buying cheaper goods. It is moving deeper into the value chain, with more control over product origin, pricing, exclusivity, and assortment. Management explicitly says direct import allows supply straight from the factory to the company, without third-party intermediation, which lowers costs, affects end-product pricing, and expands the assortment, including products that are unique to the chain. That is no longer just a purchasing negotiation story. It is an operating model.

The DC is the enabling layer that allows that model to scale. The annual report explicitly ties the higher share of directly imported products to the central DC, and the presentation marks the transition into the new DC on June 1, 2024 as a clear operational inflection point. Put those two pieces together and the conclusion is straightforward: the DC is not merely a support asset for an existing retail network. It is the infrastructure that lets Max Stock keep a bigger share of the merchandise margin inside the system.

The DC Is Not Lowering Logistics Costs, It Is Buying Margin Control

The interesting part is that this improvement did not come through a lower logistics-cost ratio. Quite the opposite. The presentation shows logistics costs as a percent of revenue rising to 7.0% in 2025, from 6.5% in 2024 and 5.8% in 2023, and explicitly says this primarily reflects a higher portion of direct import.

That is easy to misread. A superficial assumption would be that a new DC should lower logistics costs as a share of revenue. Here the opposite is happening: Max Stock spends more on logistics relative to sales because it is doing more of the sourcing chain itself. But those logistics costs are defined on an IFRS basis and fully captured in cost of goods sold, and even so gross margin still rose to 43.9% in 2025 from 41.8% in 2024. Within the year, the quarterly gross margin reached 45.2% in the fourth quarter.

The economics are clear. The DC is not producing some narrow logistics miracle where distribution itself becomes cheaper. It is allowing the company to replace a more expensive external merchandise cost with a more intensive internal logistics cost and still come out with a better margin structure. That is already structural, because profitability is improving not despite higher logistics intensity sitting inside cost of goods sold, but while that logistics intensity is rising.

In other words, Max Stock is buying more control over the margin stack even at the price of a heavier operating model. If that model holds, the edge is real. If it does not, the pressure will show up through inventory, lead times, and operating strain.

2025 Was Not a Clean Tailwind-Free Year

Still, anyone who reads 2025 as full proof that the edge is already durable is overstating the case. The company explicitly says the increase in gross margin came from three things together: better trade terms, a higher share of directly imported products enabled by the central DC, and a lower dollar and lower freight costs.

So even on management's own framing, 2025 is not a pure structural demonstration. It is a mix of structural improvement and friendlier external conditions.

That becomes even clearer when looking at freight. Between January and July 2024, global shipping rates first more than doubled and then rose by another roughly 150%, before easing later. During 2025, the moderation continued, but lead times still had not shortened, and the market remained sensitive to trade-route disruption and a lingering risk premium during periods of tension. In plain terms, the tariff pressure eased, but the system did not fully normalize.

This is not the same benefit twice. The weaker dollar did help the gross-margin line, but the same currency move also pushed financing expense higher. In 2025 the company recorded roughly NIS 28.4 million of losses from the revaluation of dollar hedge transactions for several quarters forward, precisely because the dollar had weakened. That means a reader focused only on gross margin gets an overly clean picture, while a reader focused only on financing expense may miss that part of the pressure there is the mirror image of an operating benefit higher up the P&L.

The better reading is this: the core mechanism is structural, the pace of 2025 was not fully structural. If the dollar reverses or freight tightens again, the company does not automatically fall back to the starting point because the direct-sourcing infrastructure and the DC are already there. But it is also too early to treat 2025 gross margin as a clean steady-state run rate with no external help embedded in it.

Supplier Concentration: Less Binary Risk, More of an Operational Chokepoint

One of the most important data points in this follow-up is that 36% of the company's purchases from overseas suppliers in 2025 came from one supplier in China, versus 38% in 2024 and 30% in 2023. That is a high figure, and it stayed high even after a modest year-over-year decline.

But precision matters here. That supplier is not described as one factory that single-handedly feeds the chain. It is described as a Trader that centralizes purchases from different suppliers and factories in China. That structure has obvious advantages: one supplier opened in the systems, one payment flow, import and regulatory handling, and product-responsibility coverage. So the concentration is not exactly concentration in a single manufacturing source. It is concentration in a commercial and operational node.

That softens part of the initial fear, but it does not remove the risk. As Max Stock deepens direct import, it becomes more reliant on its ability to manage that node without hurting availability, assortment, or quality. The company argues that it is not dependent on this supplier and can replace Traders or go directly to factories. That is more credible than the raw 36% number initially suggests, because the company has accumulated years of know-how in this model. Still, until the sourcing base becomes more diversified or the business scales further without deeper concentration, this remains a real control point.

There is another useful nuance here. A generic conversation about supplier dependence misses the actual issue. The main risk is not necessarily that one supplier disappears tomorrow. The real issue is whether a network that wants to keep increasing direct import can continue to do so while leaning on a relatively small number of commercial hubs. That is less a survival question and more a scale question.

The Cost of the Edge: More Inventory, More Supplier Financing, More Discipline

The model also carries a visible balance-sheet price. Inventory days rose to 103 in 2025 from 91 in 2024. That is a meaningful jump for a retail chain, and it fits the operating picture: more direct import, longer lead times, and more dependence on forward inventory planning.

At the same time, supplier-credit days increased to 86 from 67. In other words, part of the burden was financed through longer supplier credit.

This is the price of the structural engine. The direct-import edge is not created inside a spreadsheet. It requires more merchandise in transit, more forecasting discipline, more logistics work, and more ability to fund the interim period. Longer supplier credit offset part of the pressure, but it did not erase it. If the company wants to move closer to the roughly 85% target without seeing a further inventory build, it will need to prove that the new DC is not only allowing more import volume, but also managing that cycle better.

That is the line between a one-off margin spike and a durable edge. A durable edge means the company can hold a higher gross margin without continuing to load the system with inventory at the same rate, and without making the sourcing chain too narrow around a small number of commercial nodes.

What Is Structural, What Is Temporary, and What Is Still Open

What Has to Be Proven Next

This follow-up to the main article comes down to a simple test: is Max Stock building an advantage that gets stronger with scale, or an advantage that looked unusually good in 2025 because external conditions were favorable and will eventually run into inventory, freight, and sourcing concentration friction.

As of year-end 2025, the balance still leans to the first side, but cautiously. The direct-sourcing engine is real, the DC looks like infrastructure that lets the company retain more value inside the chain, and the numbers show that Max Stock can absorb heavier logistics intensity and still widen margin. That is a good sign, probably the best sign in the whole story.

But 2025 does not close the case. For the structural-margin argument to strengthen, the next periods need to show three things together: a sustained high direct-import share, gross margin holding at a strong level even without exceptional FX and freight support, and working-capital pressure starting to stabilize. If one of those breaks, the market will start to reread the 2025 jump as a favorable year rather than as proof of a new model tier.