Shufersal: What the Decline in Private Label, Online, and Loyalty Really Means
Shufersal exited 2025 with a real margin recovery, but the metrics that should have signaled stronger customer quality moved the wrong way: private label, online, identified purchases, and cardholder metrics all weakened. The question now is no longer whether profitability improved, but whether it rests on a stronger customer franchise or mostly on commercial discipline and efficiency.
What This Follow-up Isolates
The main piece argued that Shufersal's 2025 margin recovery was real. This follow-up isolates a narrower question: did the company's best customer-quality indicators improve alongside profitability, or did margins recover while some of the strongest customer-economics signals actually weakened?
The evidence points to the second reading. Within retail, gross margin rose to 29.8% from 28.0% and operating profit before other income rose to ILS 845 million from ILS 790 million. But same-store sales fell 9.0%, sales per square meter dropped to ILS 24,035 from ILS 26,375, private-label share fell to 18.1% from 20.1%, online mix fell to 18.2% from 19.3%, the identified-purchase rate fell to 69% from 76%, co-branded cardholders declined to 595 thousand from 614 thousand, and club membership declined to 2.2 million from 2.3 million.
That is the real tension. Shufersal improved profitability, but not through a clearly stronger owned-demand loop. The gains came mainly from commercial focus, lower shrink, better procurement, and broader efficiency actions. The indicators that usually signal stickier, more identifiable, and more profitable demand moved the other way.
| Metric | 2024 | 2025 | What It Means |
|---|---|---|---|
| Retail gross margin | 28.0% | 29.8% | Profitability improved |
| Retail operating profit before other income | ILS 790 million | ILS 845 million | A real operating improvement |
| Private-label sales mix | 20.1% | 18.1% | Weakness in a lever that supports both margin and loyalty |
| Online sales mix | 19.3% | 18.2% | Retreat in a channel that should deepen data and convenience |
| Identified-purchase rate | 76% | 69% | Less identifiable demand, less club depth |
| Active co-branded cards | 614 thousand | 595 thousand | A smaller high-value customer layer |
| Club members | 2.3 million | 2.2 million | Mild erosion in breadth |
Private Label Slipped Exactly Where Shufersal Wanted Strength
At Shufersal, private label is not just a cheaper shelf option. The company itself describes it as a growth engine, a loyalty tool, a differentiator against competitors, and a lever for category profitability. That makes the decline here more important than a simple volume shortfall.
In 2025, private-label sales fell to about ILS 2.7 billion from about ILS 3.3 billion, and its share of retail turnover fell to 18.1% from 20.1%. This is not just weaker volume. It is a retreat in exactly the component that Shufersal says should deliver better differentiation, better loyalty, and better margin.
Precision matters here. Management does not frame this as a retreat. In the annual filing it talks about an ongoing private-label transformation, wider assortment, and launches in additional categories, while the investor deck gives meaningful space to its "supported brand" strategy, which brings in global brands, expands the assortment, and targets club members. That may be a valid commercial move, but it is not the same economic mechanism. A supported brand can improve the offer. Private label is the lever that combines margin, differentiation, and a larger share of the customer relationship.
There is one constructive nuance. In the fourth quarter of 2025, private-label mix improved to 19.4% from 19.0% in the comparable quarter. That may hint at early stabilization. But on the full-year view, the result is still clear: Shufersal improved margin while its private-label engine weakened.
Online Retreated Even as the Infrastructure Kept Moving
Online matters here not just as another sales channel. The company explicitly describes it as a convenience-driven channel that supports loyalty and is backed by technology and logistics meant to shorten delivery times, improve availability, and surface offers during the order. So when online weakens, this is not just a revenue line. It is a question about the strength of the customer relationship.
Online sales fell to ILS 2.73 billion from ILS 3.16 billion, transactions fell to 4.70 million from 5.49 million, and online mix fell to 18.2% from 19.3%. That happened in a year when the presentation highlighted wider assortment, better availability, dedicated promotions, and AI-based personalization tools across the website and app.
The filing also clarifies how the model actually works. Shufersal operates two automated fulfillment centers in Modiin and Kadima, but order fulfillment from the Shufersal Online website and app also relies on 29 hybrid Deal and Universe stores, and as of the report date most products in orders from the Shufersal Online and Be Pharm apps were supplied from those hybrid stores. In other words, the hybrid-store layer remains the main operating engine.
That is not negative by itself. The company explicitly says the combination of stores, warehouses, and automated fulfillment is meant to improve service and reduce labor dependence. But if online scale is falling, the question is not whether the infrastructure exists. It is whether customer usage is actually coming back. In 2025, it did not.
Loyalty and Card Economics Became Less Traceable, Not More
For a retailer, a loyalty club and a co-branded card are not cosmetic marketing tools. They are the commercial intelligence layer of the business. They make the customer identifiable, improve basket visibility, support personalized offers, and connect payment, data, and benefits.
That is why the drop in the identified-purchase rate to 69% from 76% may be the most important deterioration in this package. It is a 7-point decline in the formats where loyalty members are identified. Club membership only fell modestly, from 2.3 million to 2.2 million, and active cards fell from 614 thousand to 595 thousand. The gap between the mild erosion in the registered base and the sharper fall in identified purchases suggests the issue is not only the size of the club. It is the depth of usage.
Management is clearly not ignoring the issue. The filing says the company is continuing to develop the loyalty club, create additional customer offers, increase the number of card users, and widen card usage. The presentation shows what that looks like on the ground: faster club registration at self-checkout, dedicated member sales days, a targeted WhatsApp channel, a larger joining gift for the Shufersal card, deeper subsidy on the Shufersal 4U benefits site, and the launch of SBOX for cardholders.
But that is exactly the point. When a company is broadening benefits, deepening subsidy, and launching a new loyalty program while the number of cardholders and the identified-purchase rate are both falling, it is hard to frame the year as a victory lap for the customer engine. It is more accurate to see 2025 as an operating repair year that also exposed weaker relationship depth in several key metrics.
The filing adds one more layer. In 2025, 15% of company sales were generated by customers who paid with the group's co-branded cards, and cardholders represented 27% of total club members. That is enough to matter. It is not yet broad enough to argue that financial services have already become a fully scaled consumer engine.
What This Says About the Quality of 2025's Improvement
This is not a collapse. A base of 2.2 million members, 595 thousand cards, ILS 2.73 billion of online sales, and 18.1% private-label mix is still substantial. The margin improvement is also real, and retail operating profit did move higher. A constructive reading can reasonably argue that 2025 was a cleanup year: lower-quality volume was pruned, promotions became more disciplined, private label was being reshaped, and digital and financial tools were still being built for later payoff.
That is a serious counter-thesis, and it should not be dismissed. The fourth quarter even gives it one early foothold through the modest private-label improvement. But as of year-end 2025, the cleaner read is different: Shufersal lifted profitability before it proved that the customer had become stickier, more identifiable, and more deeply embedded in the company's own systems.
That matters because not every retail margin point is the same. A margin built on stronger private label, more identified purchases, more house-card spend, and stable or rising online penetration is easier to defend. A margin built mainly on commercial discipline, lower shrink, better procurement, and efficiency is still real, but it is less convincing if the best customer-quality engines are weakening at the same time.
Bottom Line
Shufersal ended 2025 with better profitability, but with a customer base that looks less deep across several of its most valuable indicators. Private label fell, online fell, identified purchases fell, and the card and club layer did not expand. For now, 2025 looks more like an operating recovery year than a clear strengthening in customer economics.
Over the next 2 to 4 quarters, three things need to happen to change that read. Private-label mix needs to stop slipping and start recovering. Identified purchases need to stabilize, ideally recover, without relying only on richer subsidies and offers. And online needs to show that digital, service, and logistics investment is feeding back into transactions and sales mix, not just deck language.
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