Rami Levy In 2025: Discount Retail Still Works, but 2026 Will Test Cash Quality

Overview Of The Company

At first glance, Rami Levy still looks like a simple story: a large food discounter, little visible bank debt, a strong consumer brand, broad supplier relationships, and an Israeli shopper who still cares about price first. That is only half the picture. In practice, the group is no longer just a supermarket chain. It now operates across three layers at once: core food retail, Good Pharm as a second growth engine, and an "others" segment that bundles mobile, the customer club, Cofix, insurance, and stock retail. This is already a broader consumer platform, with more growth legs but also with more places where cash can get tied up.

What is working now is fairly clear. Group revenue rose in 2025 to NIS 7.84 billion, up 6.19%. The retail segment rose 6.37% to NIS 6.96 billion, same-store sales rose 1.98%, and sales per square meter improved to NIS 62.73 thousand from NIS 61.53 thousand. Good Pharm is no longer a side business either. It grew 16.0% to NIS 510.2 million, with 72 stores at year-end 2025 and 79 stores already by the report-sign date.

But this is still not a clean story. Operating profit rose only 4.24%, much less than revenue, and the operating margin slipped to 4.86% from 4.95%. Net profit fell 14.02% to NIS 223.0 million, mainly because net finance expense jumped to NIS 87.8 million from NIS 31.6 million. At the same time, anyone looking only at the lack of year-end bank debt could miss the more important issue: the group carries NIS 2.18 billion of lease liabilities, and the cash picture looks materially tighter once leases, capex, dividends, and the Cofix minority buyout are included.

That is why 2026 looks like a bridge year with proof points. It is not a demand test, because the retail core is already strong. It is a test of whether the company can absorb the 30 urban Super Cofix stores into the retail segment, keep expanding Good Pharm without further margin erosion, and translate a broader consumer platform into cash that still remains after the real commitments are paid.

There is also an important actionability filter here. This is not a small or illiquid stock story. Market data shows a market cap of roughly NIS 5.1 billion in early April 2026, and the last daily turnover was about NIS 12.9 million. So the friction here is not tradability. The friction is the economics of the group itself, especially how much cash is truly free after the lease layer and the wider expansion agenda.

Four Things To See Immediately

• The urban stores are already inside the company, but not yet inside 2025 retail reporting. The 30 Super Cofix urban stores moved into the company at the end of December 2025, but their 2025 results still sit inside "others". From the first quarter of 2026 onward they move into retail.
• Operating cash flow stayed positive, but all-in flexibility tightened. Operating cash flow was NIS 618.3 million, but after lease principal of NIS 194.3 million, capex of NIS 219.6 million, dividends of NIS 193.0 million, and the NIS 40.4 million Cofix minority buyout, the full-year cash picture becomes tight.
• Good Pharm is already a real growth driver, but not yet a cleaner margin driver. Sales rose 16.0%, but operating profit rose only 6.1% and the operating margin fell to 9.72% from 10.63%.
• The fourth quarter looked stronger than it really was. Retail operating improvement was also helped by war-damage compensation, while finance expense, FX, and hedging still weighed on net profit.

The quick economic map looks like this:

Events And Triggers

Super Cofix Is Already In, but 2025 Retail Still Does Not Show It Properly

The first trigger: In August 2025, Rami Levy completed a full tender offer for Cofix and moved to 100% ownership. On December 31, 2025, a statutory merger was completed in which all of Super Cofix's assets and liabilities were transferred into the company, after Cofix distributed its 70% stake in Super Cofix in kind. In practical terms, that means 30 urban grocery stores join the retail core from the start of 2026, 27 under "Rami Levy Bashchuna", two under "Switzerland Hak'tana", and one under "Super Cofix".

The more interesting point is not the merger itself but the reporting layer. The 2025 results of those stores still sit in "others", and only from 2026 onward do they move into retail. So anyone reading the next reports without adjusting for that change may think retail improved more organically than it really did, while "others" weakened more operationally than it actually did.

It is also worth noting that Super Cofix is not entering retail unchanged. The report describes a profitability-improvement effort through direct distribution, better store-space optimization, revised pricing, improved supplier terms, and more premium categories. That move may create value, but it is not yet the same as saying those urban stores already operate on the same economics as the core discount chain.

The Club With Isracard And Israir Could Help, but It Is Still Not Closed

The second trigger: The customer-club company is currently owned 80% by Rami Levy and 20% by Isracard. In March 2026, updated understandings were disclosed under which Israir would buy 10% of the club from Rami Levy and Isracard, for consideration estimated at about NIS 20 million, with roughly 56% of that amount expected to reach Rami Levy. At the same time, an 8-year cooperation framework is supposed to be signed around travel and tourism benefits alongside retail benefits.

That sounds positive, and for good reason. If completed, such a move could strengthen the club and turn it into a more meaningful consumer-differentiation layer. But it is still not money in the bank. Completion remains subject to corporate approvals and regulatory approvals, and there is also a built-in governance friction because Rami Levy's controlling shareholder is also the controlling shareholder of Israir.

The Q1 2023 Reporting Memory Has Not Gone Away

The third trigger: On March 2, 2026, the court approved a motion to manage a class action against the company over the alleged shareholder damage caused by the first-quarter 2023 reporting error that was corrected in August 2023. In the immediate report, the company said it believes it has strong defense arguments and that the claimed amount is not material to the company.

The issue here is not necessarily the size of the financial exposure. The issue is the overhang. The annual report also refers to the administrative enforcement process that ended in August 2025 and to a February 2025 derivative motion tied to Israir. This is not a solvency story and not a liquidity event, but it is a real friction layer that can keep the market from giving the group an overly clean read.

The Post-Balance-Sheet Dividend Is Both A Signal And A Test

The fourth trigger: On March 26, 2026, the company declared another NIS 42 million dividend. That is a clear management signal that the group still sees itself as capable of returning capital even after a year that included the Cofix buyout, ongoing store openings, and continued Good Pharm expansion.

But this is also where the test becomes sharper. Another payout supports a confidence read, yet it also reinforces the central question investors now need to ask: if Rami Levy is still a strong business, what is it doing with the cash it generates.

Efficiency, Profitability, And Competition

The Retail Core Still Carries The Story

The positive part of the 2025 story still sits first and foremost in food retail. Segment revenue rose to NIS 6.963 billion from NIS 6.546 billion, up 6.37%. Same-store sales rose 1.98%, sales per square meter rose to NIS 62.73 thousand, and operating profit rose to NIS 298.4 million from NIS 274.4 million. The operating margin improved to 4.29% from 4.19%.

That means the core business is still generating both volume and at least some operating improvement. But this is also where caution matters. Part of that improvement came from other income. In 2025 the group recognized about NIS 15 million from a property-tax compensation claim tied to war-related indirect damages. The directors' report explicitly says that the improvement in retail operating profit was helped by that income. So anyone trying to measure the quality of 2025 needs to separate a strong retail engine from a retail margin that also benefited from a non-recurring item.

The same tension shows up at the group level. Gross profit rose 6.07% to NIS 1.856 billion, but the gross margin slipped slightly to 23.67% from 23.69%. At the same time, selling, marketing, G&A expenses rose 7.76%, and their share of revenue increased to 19.03% from 18.75%. In plain terms, the company is still selling more, but a meaningful part of the growth is being absorbed by wages, depreciation, new stores, and indexed operating costs.

Online Is Important, but It Was Not The Growth Story In 2025

The company continues to frame online as a growth engine, and strategically that makes sense. In actual 2025 numbers, however, this was not a breakout year for the channel. Online transaction count fell to 1.202 million from 1.224 million, online revenue fell to NIS 645.8 million from NIS 661.5 million, and the channel's share of gross retail revenue fell to 9.1% from 10%.

This does not mean the online model is broken. The report stresses that the overwhelming majority of online sales are still fulfilled from physical stores, while the group also runs a dedicated Bnei Brak facility, a robotic Be'er Sheva site, and a robotic facility in Afek. In other words, online still relies on an existing store network and an improving logistics layer, not on a standalone model that has already changed the economics of the whole group.

The correct read is that online remains an important capability, but in 2025 it was not the leg pushing the group forward. That matters because the company is still investing in logistics facilities and coverage expansion, so even if the long-term story remains constructive, 2025 itself did not prove that the channel is already a major growth accelerator.

Good Pharm Is The Second Growth Engine, but For Now It Is Buying Scale Faster Than Margin

Good Pharm stands out in 2025. Revenue rose to NIS 510.2 million from NIS 439.9 million, up 16.0%. Same-store sales rose 6.17%. Store count rose to 72 from 63, and by the report-sign date the chain already stood at 79 stores with about 15 more planned for 2026.

But beneath the growth headline there is a real yellow flag. Operating profit rose only to NIS 49.6 million from NIS 46.7 million, so the operating margin fell to 9.72% from 10.63%. The report itself explains that the decline came from a lower gross margin rate and higher operating expenses driven by accelerated store openings, wages, and indexed costs.

That distinction matters. Good Pharm has already shown it has real market traction within the group, but 2025 is not yet proof that rapid rollout is translating into cleaner profitability at the same pace. For now, it is stronger proof of footprint expansion and customer adoption than of margin quality.

"Others" Shows How Much More Complex The Group Has Become

The "others" segment fell in 2025 to NIS 398.0 million of revenue from NIS 431.2 million, while operating profit fell to NIS 34.1 million from NIS 46.0 million. The company ties the main decline to Cofix. That matters for two reasons.

First, 2025 still mixes Super Cofix and the café activity inside the same segment, so it does not tell the reader cleanly enough which part of the weakness comes from urban grocery stores that are about to move into retail and which part comes from a café network that is shrinking. Second, the cafés themselves are now clearly a smaller leg. Café count fell to 20 at the end of 2025 from 38 in 2024 and 49 in 2023, and by March 2026 it had already fallen to 15.

So "others" is not a clean value engine right now. Part of it is moving into core retail, and part of it remains a bundle of complementary activities that may be useful strategically but are hard to value as an independent growth layer.

Cash Flow, Debt, And Capital Structure

The Right Cash Frame Here Is All-In Cash Flexibility

In Rami Levy's case, the relevant cash framing is not normalized or maintenance cash generation but all-in cash flexibility. The reason is simple. The thesis here is not about theoretical recurring power before capital-allocation choices. It is about how much cash really remained after the group's actual uses of cash.

Operating cash flow rose slightly to NIS 618.3 million from NIS 606.1 million. That is a good number. But it is not the end of the story. In the same year, the group paid NIS 194.3 million of lease principal, invested NIS 219.6 million in property and equipment, distributed NIS 193.0 million in dividends, and spent NIS 40.4 million buying out the public minority in Cofix.

If you stop after lease principal, capex, and dividends, only around NIS 11.4 million is left. If you also include the Cofix minority buyout, the all-in picture turns roughly NIS 29 million negative. That does not mean the company is in a cash squeeze. It does mean that the actual room to maneuver in 2025 was far tighter than the operating cash-flow headline alone suggests.

It is important to stay balanced here. This is not a classic bridge-financing story, and operating cash flow did remain strong. But by this stage the key question is no longer whether the business can produce cash. It can. The question is how much of that cash is still left once the company keeps expanding, keeps paying leases, and keeps distributing capital.

This Is Not Bank Debt, It Is A Lease Burden

At the end of 2025, the company finished with no short-term or long-term bank debt. That is a real positive and should be said clearly. But stopping there misses the real economic liability layer. Lease liabilities stood at NIS 2.183 billion at year-end, versus NIS 2.000 billion a year earlier. Of that, NIS 882.3 million related to leases with the controlling shareholder.

The implication is that the question at Rami Levy is not classic bank refinancing pressure but a fixed-commitment burden created by a wide store network, leased real estate, and a broader group structure. That is not necessarily negative. For a good retail chain it is a normal way to operate. But it does mean the company should not be framed as "debt free" in any wider economic sense.

This also connects to equity, which fell to NIS 588.5 million from NIS 611.9 million despite NIS 223.0 million of net profit, because the company paid NIS 193.0 million of dividends and bought additional minority rights in a subsidiary. In other words, even in a profitable year a large part of the value created was either paid out or redeployed.

Working Capital Still Helps, but Slightly Less

The working-capital picture is not broken, but it is less easy than before. Inventory rose to NIS 409.0 million from NIS 323.1 million, up 26.6%. Trade payables rose to NIS 1.301 billion from NIS 1.179 billion, up 10.3%. Receivables rose to NIS 347.7 million from NIS 318.4 million.

Inside retail itself, average inventory days rose to 19 from 18, customer days stayed at 15, and supplier days stayed at 73. So the supplier-funded model still works, but it is not improving. Once the company adds stores, new formats, and more Good Pharm openings, even a small working-capital drift starts to matter more.

Not A Liquidity Crisis, Yes A Capital-Allocation Test

It is important not to overstate the problem. This is not an acute financing story. The company ended the year with NIS 729.0 million of cash and cash equivalents, plus NIS 143.1 million of short-term investments. There is no immediate liquidity squeeze here.

But that is exactly why the market has moved on to a subtler question. If Rami Levy is still a strong business, what is management doing with the cash. In 2025 it paid leases, invested, bought out the Cofix minority, and distributed dividends. In 2026 it already declared another dividend. So the new investor test is no longer "is the company safe", but whether it is allocating capital at a pace that matches the economics that remain after all the obligations are paid.

Forecasts And Outlook

Before getting into the detail, there are four points worth holding for 2026:

• Retail will jump mechanically in 2026 as well. The 30 urban Super Cofix stores move into the retail segment, so the headline will look stronger than the organic base.
• Good Pharm will keep growing, but it has already shown that fast expansion can dilute margin. That means the coming year will be judged less by store count and more by store quality.
• The club deal with Israir is optionality, not fact. Until approvals and binding agreements are in place, it is not a value layer that should be counted as certain.
• The post-balance-sheet dividend leaves the cash question open. It supports a confidence read, but it also reinforces the capital-discipline test.

2026 Is A Bridge Year, Not A Clean Celebration Year

The right way to read 2026 is as a bridge year. It is not a reset year, because the retail core has not broken. It is not a clean breakout year either, because the group structure is still being reorganized. It is a year in which several moving pieces have to connect: Super Cofix entering retail, continued Good Pharm openings, a more coherent "others" segment, and a real decision on what the customer club becomes.

From the market's point of view, this also creates a real risk of misreading. If retail revenue jumps in 2026, it will be easy to treat that as sharp operational improvement. In practice, part of that move will be classification. The next reports will therefore need to be read through two lenses at once, what is organic and what is structural.

Absorbing The Urban Stores Is The First Real Test

This is the most immediate 2026 test. Thirty urban stores are entering retail, but they are not entering an empty system. They are entering a discount chain that already runs on its own price architecture, logistics model, promotional rhythm, and aggressive competition.

The company has already described how it tried to improve Super Cofix through direct distribution, space optimization, better trade terms, and a wider premium mix. If that works, 2026 may start to show that the neighborhood format is not just extra volume but a real network-extension tool. If it does not, retail may look larger while becoming less clean.

Good Pharm Needs To Move From Rollout To Productivity

Good Pharm enters 2026 with a plan to open about 15 additional stores, after 11 openings and two closures in 2025. The report also points to around NIS 20 million of 2025 investment and a similar expected expansion in selling area during 2026.

That means the next test is no longer whether Good Pharm can grow. It can. The test is whether it can keep same-store sales healthy while stabilizing the margin. As long as the chain keeps adding stores while the operating margin moves down, its contribution to the group remains more about revenue scale and less about profit quality.

The Club Needs To Move From Promise To Contract

If the Israir and Isracard deal gets signed and approved, it could become a meaningful value add. A customer club that combines food, consumer spending, and travel can be highly attractive in the Israeli market. But until that happens, caution is still the better reading. Right now it is an option layer, not a cash layer.

And even if it is approved, it has to be judged on both sides. It may improve the attractiveness of the club, but it also adds related-party complexity, shared budget structures, and reliance on external execution.

What Could Change The Market Read In The Near And Medium Term

The first thing the market may miss is that 2026 retail comparisons will come with a structural reporting change. The second is that 2025 operating profit already received some help from other income, so investors looking for a cleaner improvement will want to see it without that support. The third is that operating cash flow remained solid, but the market is now focused on what is left after everything, not only on what was generated before everything.

That makes three practical checkpoints especially important:

• whether the new retail segment, including the urban stores, can hold a reasonable margin,
• whether Good Pharm can keep growing without further operating-margin erosion,
• and whether the all-in cash picture for 2026 begins to look more spacious, or whether the group keeps running through most of the cash it generates.

Risks

The First Risk Is Not Bank Debt, It Is Leases

The absence of year-end bank debt is a real positive. It can also mislead. Lease liabilities stood at NIS 2.18 billion, and lease-principal payments alone were NIS 194.3 million in 2025. That is a very real cash-use layer, and a material part of it sits against controlling-shareholder properties.

The Second Risk Is That Good Pharm Grows Faster Than Its Economics

Fast expansion sounds good until it starts eating margin. Good Pharm already opened aggressively in 2025 and already showed that operating profit is not rising at the same pace as revenue. If that pattern continues in 2026, the gap between a growth engine and a value engine will become more visible.

The Third Risk Is Governance And Legal Noise

The March 2026 class-action approval, the August 2025 administrative enforcement settlement, the derivative motion around Israir, and the consumer-authority notices do not currently look existential. But they do keep the company in a place where investors have reason to apply a discount for caution.

The Fourth Risk Is Still Competition

The company itself describes a highly competitive food market, a highly competitive pharmacy market, and rising online competition. As long as Rami Levy still relies on price competitiveness and physical expansion, any wage pressure or pricing pressure can appear quickly in the margin line.

The Fifth Risk Is Confusing Created Value With Accessible Value

The group is clearly broader now: retail, pharmacy, neighborhood stores, club, communications, and more. That may create real operating value. But public shareholders still need to ask how much of that value is accessible after leases, dividends, minority buyouts, and continued rollout.

Conclusion

Rami Levy exits 2025 as a stronger retail company than the net-income line alone suggests, but also as a more complex group than a simple "one discount chain" reading would imply. The retail core still works, Good Pharm is already large enough to matter, and the balance sheet does not look financially stressed. What changed is the market's focus. Investors are no longer looking only at sales momentum. They are looking at the quality of the wider group, and especially at how much cash still remains after all the expansion layers are paid for.

Current thesis: Rami Levy enters 2026 with a strong discount-retail core, but the coming year will be judged on whether it can absorb the urban-store move, stabilize Good Pharm's margin quality, and rebuild real cash room after all commitments.

What has changed versus the older, simpler reading of the company is the center of gravity. It used to be easy to read Rami Levy mainly through price, store traffic, and branch count. Now it needs to be read through a combination of reporting reclassification, leases, Good Pharm, the customer club, and capital allocation. This is still a company with a high-quality core, but it is no longer a linear or especially simple story.

The strongest counter-thesis is that this caution is overstated. One can argue that the core retail engine is still growing, the working-capital model remains favorable, there is no meaningful year-end bank debt, and Good Pharm is still early in a runway that may become a far stronger second profit engine. On that reading, 2025 is simply another step in building a broader consumer platform, and the net-income drop is financing noise rather than business deterioration.

What could change the market interpretation in the near to medium term is mainly the quality of 2026 conversion. If the retail segment absorbs the neighborhood-store layer without margin damage, if Good Pharm keeps growing without further erosion, and if the all-in cash picture looks more comfortable, the market can return to a constructive "strong chain expanding well" read. If not, 2025 may look in hindsight like the year in which the group did grow, but also became heavier.

Why this matters: in a broad consumer chain like Rami Levy, business quality is no longer defined only by who can sell cheapest. It is defined by who can expand without having free cash disappear inside leases, store openings, buyouts, and club-related promises.

What must happen over the next 2 to 4 quarters for the thesis to strengthen is straightforward: the 30 urban stores need to be absorbed into retail without a meaningful margin hit, Good Pharm needs to hold productivity while continuing to open stores, and the cash left after leases, capex, and dividends needs to improve. What would weaken the thesis is a bigger retail segment with a lower-quality margin, another step down in Good Pharm margin quality, and continued capital returns without a cleaner cash picture underneath.