Shufersal in the First Quarter: Sales Returned to Growth, Cash Still Has to Fund a Heavy Dividend
The first quarter closed part of the 2025 follow-up list: same-store sales rose 3.7% and private label jumped to 20.6%. But Passover timing, a lower online share, and the NIS 396 million dividend keep 2026 as a proof year rather than a clean victory lap.
Shufersal opened 2026 with the quarter the market needed after 2025: same-store sales returned to growth, private label reached 20.6%, and operating profit before other income and expenses reached NIS 275 million, or 7.5% of sales. That is a real improvement from last year's weak starting point, and it closes part of the follow-up list from the previous annual analysis. Still, this is not a quarter that clears every doubt. Passover timing pulled more demand into the first quarter, online sales continued to decline as a share of sales, and cash flow from operations fell to NIS 572 million despite higher profit. After non-financial investments, lease payments, and financial debt service, the quarter left about NIS 276 million before the dividend, compared with the NIS 396 million dividend declared in the quarter and paid in April. The current read is therefore better than at year-end 2025, but it still needs proof: the core retail business is showing signs of recovery, while the next quarters need to show that demand holds without margin erosion and that shareholder distributions do not run ahead of cash left after all real cash uses.
What the Company Really Is and What Changed This Quarter
The company is a food and pharmacy retailer with a meaningful real-estate layer. At the end of March 2026 it operated 436 stores, had about 562 thousand square meters of gross commercial space, a loyalty club of about 2.2 million members, and about 590 thousand credit cards. The LARO real-estate arm holds about NIS 5.4 billion of real estate assets owned by the group, including properties used by the retail business and externally leased assets.
The business has two different economic engines. In retail, profit is built from volume, price, private label, shrink, procurement, wages, rent, and leases. Negative working capital is a normal part of the model because suppliers finance part of the cycle, but it can also blur the gap between accounting profit and cash actually left in the business. Real estate adds a cushion and optionality, but it is not automatically cash accessible to shareholders.
Retail did most of the work in the first quarter. The retail segment generated NIS 3.657 billion in external revenue and NIS 239 million of operating profit before other income and expenses, compared with NIS 197 million in the comparable quarter. The real estate segment generated NIS 31 million of external revenue, another NIS 39 million of inter-segment revenue, and NIS 53 million of operating profit before other income and expenses. The quarter's change in interpretation therefore comes first from stores, shelves, and cash flow, not from the real-estate valuation.
Sales Recovered, but Passover and Online Still Require Caution
Group revenue rose 4.5% to NIS 3.688 billion. In retail, direct-operation revenue rose to NIS 3.378 billion, franchise revenue rose to NIS 79 million, and wholesale slipped slightly to NIS 200 million. Same-store sales rose to NIS 3.675 billion, up 3.7%, and sales per square meter rose to NIS 6,055.
That is an important change from 2025, when falling same-store sales and lower sales per square meter were the main yellow flag. But the first quarter benefited from Passover timing. In 2026 the holiday fell in early April, so a larger part of pre-holiday shopping entered the first quarter. In 2025 the holiday fell in mid-April, and its impact was split between the first and second quarters. The external backdrop also helped: management attributes part of the increase to a general rise in local consumption around a military operation.
The quarter gives a better answer on private label than on online. Private-label share rose to 20.6% of sales from 18.1% in the comparable quarter, an important signal after the weakness in 2025. A strong private label supports loyalty, differentiation, and pricing power. By contrast, online sales fell to 17.8% of sales from 19.8%, despite two automated fulfillment centers and continued digital investment. Demand improved, but the quality of that demand is not fully settled.
Profitability Is Stronger Than Cash Flow
The impressive part of the quarter is that margins did not give way when sales rose. Gross profit rose 7.8% to NIS 1.129 billion, and gross margin rose to 30.6% from 29.7%. Selling, marketing, general, and administrative expenses rose to NIS 854 million, but stayed at 23.2% of sales, as in the comparable quarter. The result was a 19.6% increase in operating profit before other income and expenses.
The explanation is a mix of commercial focus, lower shrink, better procurement and cost management, closing loss-making stores, and format conversions, including 28 stores converted to the Universe format by the publication date. This is not just generic cost cutting. It is an attempt to lift profit per shekel of sales. In the next reports, the market will test whether this improvement holds once the Passover effect spreads out.
The balance sheet gives the company plenty of room. At the end of March, net liquid assets totaled NIS 2.366 billion, gross financial debt was NIS 1.726 billion, and net financial cash was NIS 652 million, compared with NIS 301 million at the end of 2025. Financial covenants are far from pressure, and the company has NIS 400 million of committed and undrawn credit lines until December 2026. The issue is not immediate liquidity. It is the relationship between the distribution pace and cash left after fixed cash uses.
Cash flow from operations was NIS 572 million, compared with NIS 664 million in the comparable quarter. The decline came despite higher profit, mainly because of working-capital movements and higher tax payments. Customers consumed NIS 334 million, inventory consumed NIS 42 million, suppliers added NIS 199 million, and other payables and provisions added NIS 401 million. In a large retailer this volatility is normal, but it is a reminder that profit is not the same as free cash.
The relevant frame here is all-in cash flexibility: what remains after the payments the company actually made or committed to. In the first quarter, cash flow from operations of NIS 572 million left about NIS 276 million after NIS 78 million of non-financial investments, NIS 150 million of lease payments, and about NIS 68 million of financial debt service. That is before the NIS 150 million net investment in deposits, and before the NIS 396 million dividend declared on March 30 and paid on April 30. On a static calculation, adding the dividend paid right after quarter-end means the quarter's own surplus did not cover the distribution.
Conclusions
The first quarter improved the starting point for 2026. The company showed that the 2025 profitability improvement was not only a one-off line item: sales returned to growth, gross margin rose, operating expenses stayed stable as a share of sales, and private label gave the first positive signal after a weaker year. That is enough to weaken the counter-thesis that 2025 was only a temporary cleanup year.
But the conclusion is still incomplete. Passover timing means the second quarter must be read before declaring a full demand recovery, online is still not behaving like a relative growth engine, and the NIS 396 million dividend brings the discussion back from the headline of net cash to the question of what really remains after leases, investments, and debt service. Real estate advanced through a non-binding framework with Tidhar in Talpiot, but there is still no binding transaction or cash accessible to shareholders.
Over the next two to four quarters, the proof points are clear: same-store sales and sales per square meter need to hold after the Passover effect, private label must stay above 2025 levels without renewed margin erosion, online must stop declining as a share of sales, and cash flow must show that the surplus after leases, investments, and debt service can support the distribution policy. If that happens, the first quarter will read as the beginning of a new base. If not, it will look more like a good quarter helped by favorable timing and a strong balance sheet.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.