Shuk HaIr on the Way to 100%: Will the Footprint Finally Start Producing Profit

The main article argued that retail is the weak link in Bikurey HaSade's 2025 cycle. This follow-up does not go back through the whole company. It isolates Shuk HaIr and asks a narrower question: after expanding to 18 stores and signing a conditional deal on the way to 100% ownership, is the chain actually nearing an inflection point, or is it still adding space, payroll, and rent faster than it adds profit.

Some things are already working. Trade terms improved, the customer club grew to 171,961 members, and the identified-purchase rate jumped to 27.9% from 16.9%. Those figures show that the loyalty and identified-purchase layer is still moving in the right direction. But the numbers that settle the economic question tell a different story: retail segment revenue fell 2.1% to NIS 614.4 million, same-store sales fell 5.45%, segment operating profit dropped 54% to NIS 8.1 million, and segment pre-tax profit fell 68.5% to NIS 4.6 million. At the same time, store capex rose to NIS 13.2 million from NIS 8.9 million, while headcount increased to 722 from 607.

That is the core of the story. 2025 shows that Shuk HaIr can widen the footprint and deepen its loyalty layer. It still does not show that the wider footprint can produce enough profit.

What Store Economics Actually Did

In 2025 Shuk HaIr opened two new stores, in Ramla and Hadera. The problem is that the added footprint did not show up in revenue. Management itself says the new stores still had not contributed materially to revenue, while same-store sales moved lower. That means the increase in store count still cannot be read as proof of growth. At this stage it mostly reads as a bigger cost base.

The cost bridge is just as important. Retail cost of sales fell by roughly NIS 9.5 million, mainly because of better trade terms. In other words, procurement actually improved. But that gain was more than offset by roughly NIS 14.8 million of additional selling and marketing expense, mainly because of new stores, inflationary pressure, higher payroll, and rent indexed to CPI. General and administrative expense added another roughly NIS 0.7 million because of management payroll. The conclusion is straightforward: Shuk HaIr earned more on the merchandise side, but gave that back in the operating layer of the chain.

That is also the most important clue for 2026. A food retailer with thin margins can absorb a modest revenue setback if productivity and operating costs stay under control. Shuk HaIr was not in that position. The rollout moved ahead, but the rest of the organization did not catch up. Store capex already rose above segment operating profit, so 2025 does not look like a harvest year for expansion. It looks like a bridge year in which the cash went out first and the profit still has not arrived.

Headcount rose almost 19%, while sales per employee fell more than 16%. In retail, that is usually the point where a moderate revenue decline turns into severe margin pressure. Until that metric reverses, it is hard to argue that Shuk HaIr's problem is only temporary market noise.

100% Changes Value Capture, Not the Operating Proof

After year-end, Bikurey HaSade Retail, the subsidiary that holds Shuk HaIr, signed a conditional agreement to buy the remaining 10% of Shuk HaIr from Rafael Steinberg, Shuk HaIr's CEO and a relative of the controlling shareholders. The price is supposed to be determined by an external independent valuation, less NIS 75 thousand that the seller will bear as participation in deal costs. The first payment is meant to cover the seller's withholding tax, with the balance paid in 12 equal monthly installments after closing.

The critical point is not the payment structure but the context. As of the report date, the agreement still depended on the required corporate approvals and on approval by the buyer's board, and the final valuation had not yet been received. The company also says explicitly that completion of the deal is not expected to have a material effect on its financial results or financial position. That is an important clue: the move to 100% is not supposed to create an immediate jump in sales, margin, or balance-sheet strength on its own. It mostly changes who keeps the upside if and when the chain improves.

Put differently, 100% is a multiplier on what Shuk HaIr eventually becomes. It is not the operating fix for what the chain is today. If profitability recovers, the full improvement stays inside the group. If it does not, the group simply owns 100% of the problem. That makes this a capital-allocation and governance move, not proof that the turnaround has already happened.

The Next Footprint Is Already Queued, Which Makes 2026 a Proof Year

Shuk HaIr does not own the commercial spaces in which it operates. The entire footprint sits on third-party leases. Initial lease terms generally run for 3 to 10 years, with extension options of 5 to 8 years each, and in some cases up to 20 years in total. According to the company, the options exercise automatically, and the lease periods that management intends to use also range from one year to 20 years. That means footprint is not just opportunity. It is also a long-duration commitment layer, partly indexed to CPI and sometimes including a variable component tied to store turnover.

That is exactly why the next wave matters more than the current store count. As of the report date, the company had already signed two additional lease agreements for stores in Netanya and Beit Shemesh, plus another memorandum of understanding for a store in Ashdod. At the same time, management says Beit Shemesh is expected to open toward the end of 2026, while another Netanya store is still subject, among other things, to possession and contractor fit-out timing. In other words, the next rollout is already lined up before the 2025 openings have proven themselves.

That is what makes 2026 a proof year rather than just another rollout year. Management says it reviews each store based on profitability, expected future sales, the ability to improve lease terms, and operational efficiency, and if necessary it can close stores. That is the right yardstick. The key is not how many more stores get opened, but whether the 18 stores already in place begin to produce the sales density and productivity needed to justify the commitment base that has already been built.

There is one real reason to believe the story can still improve. In the fourth quarter the company started strengthening the chain's management and operations, appointed the group's CFO as deputy CEO of Shuk HaIr, and hired a VP of operations along with new store managers. That is the right response to the right problem. But for now it is still a management response, not a proven result.

What Has to Show Up in the Next Reports

Three tests will decide whether the footprint is finally starting to work:

• same-store sales need to stop falling, and preferably turn positive, so that the growth in the customer club and identified purchases starts translating into actual revenue;
• payroll, rent, and operating expenses need to grow more slowly than revenue, otherwise every procurement improvement will keep disappearing in the operating layer;
• the stores opened in 2025 need to start contributing meaningfully to revenue and profit before the chain moves into the next round of openings and lease commitments.

Conclusion

Shuk HaIr in 2025 does not show a collapse on the customer side. It looks like a chain whose footprint got ahead of its profitability. That distinction matters, because a chain in that position can still improve. But until same-store sales, sales per employee, and segment profit start moving together in the right direction, the path to 100% remains a story about capturing future value, not value that is already being created today.

That is exactly why the next phase of expansion has to be judged carefully. If Shuk HaIr can turn the existing 18 stores into a chain with steadier profitability, moving to 100% will make sense because it will keep the full improvement inside the group. If not, it will only concentrate 100% of the commitment to a retail chain that still has not proved that every additional store really lifts the bottom line.