Beitili And Home Design: Does The Small-Format Reset Really Fix The Economics
Multi Retail's Home Design segment moved in 2025 from aggressive network cleanup to small-format Beitili openings, and the numbers already look less bad. But behind the headline on adjusted profitability sits a narrower question: does the new format really fix store economics, or does it mostly buy time through closures and a bigger online mix.
What This Continuation Is Isolating
The main article already moved the balance-sheet debate out of the center. The unresolved bottleneck is Home Design, and inside Home Design the real question sits with Beitili. This follow-up isolates whether the roughly 350 sqm small-format model actually changes unit economics, or whether it is mainly a faster way to cut away a weak network while demand is still rebuilding.
Three numbers frame the issue quickly. First, Home Design segment EBITDA excluding IFRS 16 improved to negative NIS 1.7 million in 2025 from negative NIS 6.5 million in 2024, but adjusted EBITDA only turned positive at NIS 2.8 million after stripping out the drag from five closed stores. Second, those five stores alone had a negative contribution of NIS 4.4 million in 2025 and represented 12.9% of segment revenue. Third, same-store sales rose 8.5%, but that metric includes the segment's online sites at the same time that online mix rose to 15.1% from 10.2%.
That leads to the core point: the small-format reset has already improved the math, but it has not yet proven that the network is healthy on its own. 2025 was still primarily a cleanup year. 2026 is supposed to be the proof year for whether the cleaned-up network can actually earn money without another round of closures.
| Metric | 2024 | 2025 | Why it matters |
|---|---|---|---|
| Segment EBITDA, excluding IFRS 16 | NIS -6.5 million | NIS -1.7 million | A clear improvement, but not yet clean reported profitability |
| Adjusted segment EBITDA | NIS -3.8 million | NIS 2.8 million | Profitability only returned after neutralizing the closed stores |
| Same-store sales | NIS 122.4 million | NIS 132.8 million | A strong headline, but it includes online |
| Online share of segment sales | 10.2% | 15.1% | Part of the improvement moved through channel mix, not only store traffic |
| Number of store transactions | 92,691 | 90,138 | The recovery was not driven by broader traffic |
| Average ticket | NIS 1,911 | NIS 1,991 | More of the recovery came from larger baskets |
What Actually Improved In 2025
The healthiest thing that happened in Home Design during 2025 is that the company stopped defending space that did not justify itself. Segment loss narrowed to NIS 2.6 million from NIS 11.0 million, but the real gap sits at the level of weak stores that were removed from the network. The five stores that were closed alone dragged results by NIS 4.4 million while still accounting for 12.9% of segment revenue. In other words, the first leg of the recovery came from deleting bad footprint, not from a sharp demand recovery.
That is not a technical footnote. It is the center of the story. In furniture retail, closing weak space is not just an accounting action. It is a direct reset of rent, municipal taxes, payroll and display inventory. That is why the move to positive adjusted EBITDA matters. But it also means that the piece already proven is management's ability to cut, not yet the ability of the rebuilt network to grow cleanly.
At the same time, the company opened four Beitili stores in 2025 in a new format, each on roughly 350 sqm versus about 1,000 sqm on average in the legacy store base. The model relies on a tighter showroom and digital tools to extend assortment. That matters because roughly 90% of Home Design segment sales still come from furniture. So the new format does not make the category less cyclical or less tied to big-ticket spending. What it tries to change is how much space and operating cost are required to sell it.
That chart is the key setup for 2026. If the new format really fixes the economics, the next step cannot just be fewer bad stores. It has to become visible in the profitability of the stores that remain and the small-format stores that were added.
Why The Same-Store Number Looks Stronger Than It Really Is
On first read, Home Design looks like a straightforward rebound story. Same-store sales rose 8.5% in 2025 and 4.7% in the fourth quarter. Sales per sqm also rose 5.4% for the year and 6.0% in the fourth quarter. Those are the kind of numbers that can easily be read as a clear recovery in demand.
But this is exactly where the reader should slow down. By the company's own definition, Home Design same-store metrics include the segment's online sites. In the same year, online share of segment sales rose to 15.1% from 10.2%. So the 8.5% number cannot be read as a pure physical-store traffic figure. Part of the rebound ran through the digital channel, and that changes the interpretation.
Even a basic customer-behavior split points in the same direction. Store transactions fell to 90,138 from 92,691, while the average ticket rose to NIS 1,991 from NIS 1,911. The network sold fewer transactions, but at a larger basket. That can still be perfectly fine in furniture retail, but it is not the same thing as a chain bringing broad traffic back into stores.
That is why the central yellow flag around Beitili has not disappeared. The small-format model can work even without a full traffic comeback if it can sell well on less space and with less display inventory. But then it has to be judged through store economics, not through a single same-store headline that blends stores and online into one number.
What The 2026 Budget Is Actually Assuming
This is where the valuation report matters more than the slogan. The relevant question is not only whether there was no impairment. It is what exactly has to happen for there to be no impairment. The 2026 picture looks aggressive at first glance: segment revenue is expected to rise to NIS 148.8 million from NIS 137.2 million, gross margin to improve to 51.4% from 48.4%, and operating margin before other income and expense to move to 2.6% from negative 5.9%.
But once the assumptions are unpacked, the model turns out to be less heroic than the headline suggests. Budgeted growth in existing stores is 6.2%, yet the valuer explicitly notes that during June 2025 most Home Design stores were closed for 12 days and that this reduced existing-store revenue by about NIS 2.4 million. After neutralizing that hit, the implied existing-store growth for 2026 falls to only about 3.6%. That is not a breakout assumption. It is a modest recovery assumption.
Just as important, a large portion of 2026 growth comes from simple rollout mechanics rather than a dramatic swing in demand. The four stores opened in 2025 contributed only NIS 2.8 million in 2025 because they operated for just a few months, but they are expected to contribute NIS 14.0 million in 2026 on a full-year basis. Online is expected to rise to NIS 25.4 million from NIS 17.7 million. That growth is not free: the online marketing and advertising budget jumps to about NIS 4.5 million from about NIS 2.0 million in 2025.
| 2026 budget lever | Core assumption | What it means economically |
|---|---|---|
| Existing stores | NIS 102.1 million of revenue, up 6.2% | After normalizing for the June 2025 disruption, the assumption is only about 3.6% |
| Online | NIS 25.4 million, up 43.2% | Expansion is being bought with a much larger marketing budget |
| Stores opened in 2025 | NIS 14.0 million versus NIS 2.8 million in 2025 | Most of the jump is annualization, not necessarily extraordinary productivity |
| Stores to open in 2026 | NIS 5.0 million | Part of the growth still comes from rollout, not only from the legacy base |
| Segment gross margin | 51.4% versus 48.4% in 2025 | Improvement, but still within a plausible operating range |
| Selling and marketing ratio | 41.3% of revenue versus 46.4% in 2025 | This is the real lever in the reset |
The implication is important. The budget does not require a miracle in demand. It requires a cheaper network. If that happens, the segment can get to decent numbers even without a full recovery in furniture demand. If it does not happen, it is hard to see where the margin is supposed to come from.
Does The Small Format Really Fix The Economics
The short answer is yes, but not all the way yet. The constructive side of the story is that the valuation does not build the recovery on explosive growth. It builds it primarily on a cheaper network. That is especially visible in existing stores: their gross margin is expected to slip slightly to 50.9% from 51.2%, yet selling and marketing expense is expected to fall to 41.7% of sales from 46.1%. In other words, the model does not need a store that sells dramatically better on every item. It needs a store that requires less rent and less operating expense to sell roughly the same thing.
Three concrete actions are supposed to produce that in 2026. Moving the Beitili Ashdod store to a much smaller footprint is expected to reduce selling and marketing expense by about NIS 991 thousand. Closing Urban Rishon LeZion and merging it into Beitili Rishon LeZion is expected to save another NIS 849 thousand. A new lease agreement in Beitili Beer Sheva is expected to save another NIS 395 thousand. Those are small numbers at the group level, but they are large numbers for a segment trying to move from a negative 5.9% operating margin to only 2.6%.
The other side is that the new model still does not sit on a thick base. Stores opened in 2025 are expected to run in 2026 with selling and marketing at 52.0% of revenue. Stores that open in 2026 are modeled even higher, at 58.1% in their first year. That is understandable for new stores, but it also means the small-format model does not eliminate the ramp burden. It mainly reduces the size of the bet taken on each new location.
Online, which is carrying a bigger share of segment sales, is also not a free engine. More sales through online are positive for the segment, but when they come together with a roughly 76% jump in online selling and marketing expense, the question quickly shifts from an online business that is growing to an online business that is growing at a reasonable cost. That is exactly what 2026 will have to prove.
There is one more important layer. The valuation sets a recoverable amount of NIS 62.4 million against a carrying value of NIS 42.8 million, so no impairment was required. That is enough cushion to keep the segment above carrying value, but it is also a reminder not to mistake an impairment test for an equity story. It is a basic survivability test for the segment, and it works only because the model assumes that the smaller network really can lower the expense ratio.
Bottom Line
Beitili's small-format reset probably does improve the economics, but mainly through the cost side. That is a critical distinction. 2025 proved that management can clean up the network, close weak space and improve the result. What 2026 has to prove is harder: that the remaining network can hold profitability without further help from closures and without leaning on online-mix effects inside the same-store headline.
So the right reading is not full recovery. It is an operating reset that is still halfway through the job. If the small-format stores can hold gross margin around 51% while mature-store selling and marketing stays around 41% to 42%, Home Design can finally move from being the problem child to being a reasonable segment. If ramp costs drag on, if online needs too much paid traffic, or if the larger basket seen in 2025 does not hold, the segment could still discover that the network became smaller before it became genuinely better.
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