Victory: Are Online, Imports and New Categories Producing High-Quality Growth?

What This Follow-Up Is Isolating

The main article already argued that Victory's better gross margin in 2025 did not make it through to profit or cash. This follow-up isolates the question sitting underneath that result: are the growth levers management is pushing now, online, imports and new categories, producing high-quality growth, or are they still consuming more working capital than the value they are proving.

The short version: in 2025 Victory did not buy growth through bad debts or through dependence on a single anchor customer. The issue is subtler. It bought growth through a heavier balance sheet: more inventory, slightly longer customer credit, and less supplier funding. That does not mean the strategy is wrong. It does mean that, at this stage, a meaningful part of the proof still sits outside the income statement and inside the pace at which working capital stops being absorbed.

That matters precisely because some of the newer channels look good on first read. Online kept growing, the Wolt cooperation kept expanding, management kept pushing parallel imports, and electronics sales jumped. But once Appendix A and the customer, inventory and supplier lines are read together, the picture becomes less comfortable: the decline in operating cash flow in 2025 was explained mostly by working capital, not only by weaker profit.

Working Capital Is the Story, Not Just Cash Flow

Cash flow from operations fell to ILS 148.8 million in 2025 from ILS 182.7 million a year earlier. That is a drop of ILS 33.9 million. Once Appendix A is unpacked, it becomes clear that most of the story sits in three lines alone: customers, inventory and suppliers.

In 2024 those three items were almost neutral from a cash-flow perspective. A rise in customers of ILS 11.8 million and a rise in inventory of ILS 9.2 million were almost fully offset by a rise of ILS 21.1 million in suppliers and service providers. In 2025 the picture reversed. The rise in customers still consumed ILS 8.5 million, the rise in inventory consumed ILS 15.3 million, and this time suppliers and service providers no longer funded the gap but actually fell by ILS 3.5 million. Together, that created a ILS 27.3 million drag on cash flow.

That is the key number. The shift from a nearly neutral impact in 2024 to a ILS 27.3 million outflow in 2025 explains about 81% of the annual decline in operating cash flow. In other words, this was not only a year with weaker profit. It was a year in which the newer growth engines required more financing from the balance sheet.

The working-capital cushion itself also shrank. The company still reports positive working capital, ILS 53.2 million at the end of 2025, but that number stood at ILS 75.8 million a year earlier. Management is therefore right when it says working capital allows growth, but in 2025 growth also used up a meaningful portion of that cushion.

Online and Business Customers Add Volume, but They Also Stretch the Cash Cycle

The filing does not present online as an immediate margin problem. Quite the opposite. The company says the operating margin generated by its website is similar to the operating margin of the group as a whole. The Wolt cooperation is also described as a channel that continues to expand, with more than 2,000 products, monthly turnover of about ILS 9 million as of the report date, identical pricing to the stores, and no material change in company profitability.

The hard numbers support the idea that this is already a meaningful channel. In 2024 online sales were 5.1% of revenue. In 2025 they rose to 6.45% of revenue after annual growth of about 23%. This is no longer a side pilot. It is a channel management explicitly marks as a strategic target, with an ambition to reach 10% of sales in the near future.

But this is where the difference between channel growth and high-quality growth matters. The same filing explains that adding more online delivery points increased inventory. At the same time, the company has been expanding work with large business customers in recent years, including Wolt, Ten Bis, Sodexo, Ashmoret and Plexi Israel, on payment terms of net 30 to net 60 days. That activity is still not material to the company overall, but it already sits alongside a clear extension in customer credit days, which makes it hard to ignore in the cash-cycle read.

The proof sits in the credit section. Average customer credit rose to 26 days in 2025 from 24 days in 2024. Average supplier credit fell to 60 days from 61 days. The gap is still positive in Victory's favor, but it narrowed from 37 days to 34 days. This is not a crisis. It is a direction of travel that now deserves attention.

What matters is the character of the risk. This still does not look like classic credit deterioration. Most of Victory's sales continue to be paid by credit cards, cash and checks, and the company explicitly says it has no material customer. The yellow flag here is therefore not credit quality in the usual sense. It is financing quality. When online grows, when business customers grow, and when collection terms stretch slightly while suppliers no longer provide more room, the result is not necessarily bad-debt losses. It is a cash balance that has to carry more working capital.

That point is easy to miss if the only takeaway is management's claim that online profitability is similar to the rest of the business. That may well be true at the operating-margin level. At the cash-cycle level, online and business-customer growth still require their own proof.

Imports and Electronics: Inventory Moves First, Profit Still Has to Catch Up

The filing presents an interesting mix of strategic promise and still-small numbers. On one hand, Victory says it is expanding parallel imports directly in order to lower consumer prices and improve gross margin. On the other hand, the same filing states that in 2025 that import activity was still not material to the company.

That gap matters. Imports are already visible in inventory, but they are not yet proven as a material revenue driver. The company explains that, for products imported directly from abroad, it tends to order quantities sufficient for relatively long periods, mainly in order to lower purchase costs. That makes clear commercial sense. It also increases inventory. In other words, the potential benefit of imports comes later, while the balance-sheet cost arrives immediately.

One additional detail sharpens the point. The company says it generally does not give supplier advances, except in unusual cases and in imports from abroad, and even then the amount of such advances is negligible. That means the pressure does not mainly sit in prepayments. It sits in the goods themselves. Cash is not getting stuck primarily with the supplier. It is getting stuck on the shelf and in the warehouse.

Electronics sharpen the same issue from another angle. The pilot started only in December 2025, and management already says that from the start of 2026 the company significantly increased sales in that category and is talking about high sales volumes with meaningful shekel gross profit. But in the 2025 financials the numbers are still early-stage: electronics and home-appliance sales reached ILS 16.9 million, versus ILS 3.0 million in 2024 and ILS 1.1 million in 2023. That is a sharp increase, but it is still only about 0.7% of group sales.

And here is the real contradiction worth isolating: in the product disclosure, the company explicitly says the gross-margin rate of the electronics category is materially lower than the rest of the product groups. So management is not wrong to emphasize turnover and shekel margin. But anyone screening for quality of growth should not stop there. At the percentage-margin level, this is still a weaker category. At the working-capital level, it is already part of the reason inventory rose.

The company itself ties those threads together. It says inventory increased in 2025 because of new store openings, larger imports, a significant increase in online activity, and the beginning of electronics and home-appliance purchases toward year-end. That is exactly the essence of this follow-up: these initiatives are still not large enough to reshape Victory's consolidated economics in a major way, but they are already large enough to reshape the balance sheet and the quality of cash conversion.

What Has to Change Before This Can Be Called High-Quality Growth

Two opposite reading mistakes should be avoided here. The first is to reject Victory's moves too early. That would be shallow. Online is genuinely growing, Wolt is already a meaningful channel at the monthly run-rate disclosed, imports can improve buying terms, and electronics may yet add volume and shekel gross profit. The second mistake is to assume all of that is already proven. That is not true either.

As of the end of 2025, the more conservative reading is that Victory is still in the stage where these initiatives consume working capital faster than they prove clean value creation. That means 2026 cannot be judged by strategy headlines alone. It will not be enough to see another statement about import expansion, another delivery point, or another increase in new-category sales. Several concrete things need to happen:

• Inventory has to stop rising faster than sales.
• Customer credit days have to stabilize, or supplier funding has to start offsetting them again.
• Electronics has to become large enough to justify the complexity it adds without dragging down consolidated margin quality.
• Online has to keep growing without taking another layer of cash out of operating cash flow.

This is also where market context matters. The stock itself trades on very thin daily turnover, and short interest is negligible. That makes it likely that the near-term debate will focus less on aggressive market positioning and more on how inventory, receivables and cash flow are read in the next few reports. In a stock like this, the pace at which the numbers clean up can matter more than the strategy narrative built around them.

Bottom Line

Victory is not showing fake growth here. It is showing growth that has not yet matured into high-quality growth. Online currently looks like a channel that is not materially hurting margin rate, but it is adding working-capital complexity. Imports look like a lever that can improve gross margin, but in 2025 they were still not material in revenue while their inventory effect was already visible. Electronics are already adding a nice jump in turnover, but they still sit on a lower-margin rate and on too small a weight to prove themselves.

The most important sentence is therefore a simple one: in 2025 Victory proved strategic intent. In 2026 it will have to prove capital discipline. Only if those growth engines begin to release pressure from inventory, receivables and operating cash flow will it make sense to call them value engines rather than just volume engines.