Blue Square-Israel Ltd. (NYSE: BSI) today announced results for the fourth quarter and full year ended December 31, 2000.

Results of the Year 2000

Revenues for the year 2000 increased by 5.5% to NIS 5,199.0 million (US$ 1,286.6) from NIS 4,929.5 million in 1999. Gross margins increased to 27.7% for 2000 from 26.5% in 1999.

The Company's 2000 operating income increased 22.8% to NIS 271.3 million (US$ 67.1 million) from NIS 221.0 million in 1999. Operating margins for the period increased to 5.2% from 4.5% for the corresponding period in 1999. The rise in operating margins is due both to the increase in the Company's gross profit and to the successful implementation of the Company's ongoing efficiency program.

Financial expense for the year increased to NIS 41.7 million (US$ 10.3 million) from NIS 26.7 million in 1999. This increase derives primarily from three factors:

(i) During 2000, the Company increased its level of bank finance.

(ii) ``Financial Expense'' for 1999 was affected by gains from the

increase of value of marketable securities, while in the year 2000

it was affected by a decrease in the value of marketable

securities.

(iii) The Company's financial statements are adjusted for inflation according to Israeli GAAP. In the year 2000, the CPI was flat (0%), as compared to 1999's CPI, which increased by 1.3%. The Company's net unlinked monetary liabilities appreciate as a result of a negative CPI, and depreciate as a result of a positive CPI. In 1999, the depreciation generated financial income, while in 2000, no such financial income was generated.

``Other Income/Expenses'' included a one-time charge of approximately NIS 10 million associated with the write-off of goodwill in subsidiaries. In addition, it included the divestiture of the Company's holdings in Home Centers, which contributed a before-tax capital gain of approximately NIS 32 million.

``Discontinued operations'' for 2000 are related to the sale of Blue Square Furniture, the Company's affiliate which held the Israeli franchise of IKEA N.V. in Israel, to the Company's major shareholder, the Co-Op Blue Square Cooperative Association. The deal was finalized during the first quarter of 2001. As a capital transaction with the parent cooperative, the capital gain derived by Blue Square from the sale, which amounted to approximately NIS 8 million, will be charged to ``Additional Paid-In Capital'' during the first quarter of 2001.

``Discontinued operations, net of taxes'' for 1999 included a one-time expense related to the sale of the Company's holdings in I.D. Design.

Net income for the year 2000 increased by 60% to NIS 129.4 million (US$ 32.0 million), or NIS 3.37 per ADS (US$ 0.83), compared to NIS 81.0 million, or NIS 2.11 per ADS for 1999.

For the year, sales per employee rose by 3.2% reflecting the Company's efficiency program. Same store sales for the year decreased by 4.4%, and sales per square meter decreased by 4.2%.

Results of the Fourth Quarter

Revenues for the fourth quarter of 2000 increased by 5.7% to NIS 1,293.4 million (US$ 320.0 million)(a) from NIS 1,223.3 million(b) for the fourth quarter of 1999. The unusually high 1999 fourth quarter revenues reflected the consumer reaction to ``Y2K'' fears, which led to large purchases of staple items. On a sequential basis, revenues of the fourth quarter of 2000 were lower than those of the third quarter, reflecting the timing of the fall holidays, which fell during the third quarter.

Gross margins for the quarter increased to 28.5% from 26.4% for the fourth quarter of 1999.

The Company's fourth quarter operating income increased by 48% to NIS 66.0 million (US$ 16.3 million) compared to NIS 44.5 million for the fourth quarter of 1999. Operating margins for the period increased to 5.1%, compared to 3.6% for the corresponding period in 1999, reflecting the improvement in gross margins.

Financial expense for the fourth quarter increased to NIS 13.4 million (US$ 3.3 million) compared to NIS 5.9 million for the parallel quarter in 1999 because of the factors outlined above.

As explained above, the Company recorded several one-time charges during the fourth quarter of 2000.

Net income for the quarter rose by 38% to NIS 22.6 million (US$ 5.6 million), or NIS 0.59 per ADS (US$ 0.14), compared to NIS 16.5 million, or NIS 0.43 per ADS, for the fourth quarter of 1999.

During the fourth quarter, sales per employee remained unchanged, same store sales decreased by 3.2%, and sales per square meter decreased by 3.4%.

Comments of Management

Commenting on the results, Yoram Dar, Blue Square's President and Chief Executive Officer, said, "2000 was a year of dramatic performance improvement and strategic progress for Blue Square. Through focus and hard work, we achieved almost all of the aggressive targets we set at the beginning of the year, delivering a 23% increase in operating income, a 60% increase in net income, along with improved revenues, margins, and sales metrics. Just as important, we strengthened the Company's organizational and operational foundations, giving us a more solid basis for future growth. As we move into 2001, we are sharpening our focus to ensure continued growth for Blue Square."

Mr. Dar continued, "As we move into 2001, we are sharpening our strategy to enable us to further increase our revenues and improve our margins. Increasing the level of private label sales is one of our top strategic priorities, and we have set an aggressive goal of 10% private label sales by the end of 2002. To help us achieve this target, we recently signed an exclusive agreement with a subsidiary of Casino, the French supermarket giant, to sell its `Leader Price' private label products in our region. This agreement will condense the time required to bring thousands of private label brands to our shelves. We are confident that the exceptional value offered by the Leader Price brand will result in new loyal Blue Square customers, whose purchases will bring us higher revenues and gross margins.

"Another important aspect of our work plan is the consolidation of our brand strategy. To maximize our media efforts, we are phasing out the `Zil v'Zol' brand, and extending the `Super Center' brand with new `Super Center City' neighborhood stores. We also continue to strengthen the extremely successful MEGA format. With last week's launch of a new MEGA branch in Jerusalem, we now have seven MEGA branches, and plan to open additional branches throughout the country."

Mr. Dar continued, "Besides these initiatives, we have set demanding targets in terms of Logistic Center utilization, category management, and e-commerce. Each of these areas will be important in helping us achieve our financial goals for 2001 and beyond.

"To increase shareholder value, in November we became one of the first companies to dual-list our shares on both Israeli and US stock exchanges. The immediate result was an influx of Israeli and European investors whose trading boosted our share price and liquidity."

Mr. Dar concluded, "Overall, we are very pleased with our 2000 results, and optimistic looking forward. During 2000, we proved our ability to set the right strategic agenda, and to implement it through focused hands-on management and hard work. As we enter 2001, we have sharpened our work plan, and are confident in our ability to deliver continued financial improvement."

The Company will hold a teleconference to review and discuss the results on March 6, 2001, at 10:30AM (EST). The access number from the US or Canada is 888-273-9887. The access number from outside the US and Canada is 612-332-0720. To participate, please call the access number a few minutes before 10:30AM. A taped replay of the teleconference will be available after 1:30PM (EST) on March 6, 2001, until midnight, March 7, 2001. To access the replay, please call 800-475-6701 from the US or Canada, and 320-365-3844 from outside the US and Canada. The access code for the replay is 571459.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 168 supermarkets under different formats, each offering varying levels of service and pricing.

The statements contained in this release which are not historical facts contain forward-looking information with respect to plans, projections, or future performance of the Company, the occurrence of which involve certain risks and uncertainties, including risk of market acceptance, the effect of economic conditions, the impact of competitive pricing, supply constraints, the effect of the Company's accounting policies, as well as certain other risks and uncertainties which are detailed in the Company's filings with the Security and Exchange Commission, particularly the prospectus with respect to its public offering in July,1996.

  • (a) The convenience translation of the Adjusted New Israeli Shekel (NIS) into US dollars was made at the rate of exchange prevailing at December 31, 2000: US $1.00 equals 4.042 NIS. The translations were made solely for the convenience of the reader.
  • (b) In accordance with applicable Israeli accounting principles, the Company maintains its accounts and presents its financial statements in New Israeli Shekels (``NIS'') adjusted for changes in the Israeli consumer price index (``CPI'') through the latest balance sheet date (``Adjusted CPI''). The Israeli CPI increased by 0.47% for the three months ended December 31, 2000 and remained flat at 0% for the full year ended December 31, 2000.

                       Blue Square - Israel Ltd.
              Condensed Consolidated Statement of Income
               (In thousands, except for per share data)

                                                        Convenience
                                                        Translation
                                                         into US$
                 December 2000 adjusted NIS             Three Months
           Three Months Ended        Year Ended            Ended
              December 31,           December 31,       December 31,
             2000      1999        2000       1999          2000
          ---------  ---------    ---------  --------    ------------
          Unaudited  Unaudited     Audited   Audited      Unaudited
          ---------  ---------    ---------  --------    ------------

Sales     1,293,394  1,223,328    5,199,039  4,929,484    $319,989
Cost of
 sales      925,340    900,615(1) 3,759,756  3,624,024(1) $228,931
          ---------  ---------    ---------  ---------    ---------
Gross
 profit     368,054    322,713    1,439,283  1,305,460   $ 91,057

Operation &
 administrative
 expenses   302,038    278,230(1) 1,168,030  1,084,473(1) $ 74,725
          ---------  ---------    ---------  ---------   ---------
Operating
 income      66,015     44,483      271,253    220,987    $ 16,332

Financial
expenses,
 net        (13,394)    (5,890)     (41,738)   (26,655)   $ (3,314)
           ---------  ---------   ---------  ---------   ---------
             52,621     38,593      229,515    194,332    $ 13,019

Amortization
 of goodwill (1,199)    (1,594)     (5,617)    (5,800)    $  (297)

Other (expenses)
 income, net (5,868)    (1,745)     19,139     (7,104)   $ (1,452)
            ---------  ---------   ---------  ---------   ---------
Income before
 taxes
 on income   45,554     35,254     243,037     181,428   $ 11,270

Taxes on
 income      16,700     14,876      90,479      71,179   $  4,132
            ---------  ---------   ---------  ---------   ---------
             28,854     20,378     152,558     110,249   $  7,139

Equity in
 results of
 affiliated     (74)       113       1,306        593    $   (18)
            ---------  ---------   ---------  ---------   ---------
             28,779     20,491     153,864    110,842    $  7,120
Minority
 interest in
 earnings of
 subsidiaries,
 net         (5,148)    (4,027)    (21,994)   (20,167)   $ (1,274)
            ---------  ---------   ---------  ---------   ---------
Net income
 for the period
 from continued
 operations   23,631     16,464     131,870     90,675     $  5,846

Discontinued
 operations,
 net of taxes  (993)         -      (2,500)    (9,649)    $   (246)
            ---------  ---------   ---------  ---------   ---------
Net income
 for the
 period       22,638    16,464      129,370    81,026     $  5,601
            =========  =========   =========  =========   =========

Basic and
 diluted earnings
 per ordinary share
 or per ADS from
 continued
 operations     0.62      0.43        3.43       2.36     $ 0.15

Basic and
 diluted earnings
 per ordinary share
 or per ADS from
 discontinued
 operations    (0.03)        -       (0.06)     (0.25)     $ 0.01

Basic and
 diluted earnings
 per ordinary share
 or per ADS     0.59       0.43       3.37       2.11      $ 0.14
            =========  =========   =========  =========   =========
Weighted average
 no. of shares
 outstanding
 during the
 period    38,400,000  38,400,000  38,400,000 38,400,000  38,400,000

(1) reclassified



                       Blue Square - Israel Ltd.
                 Condensed Consolidated Balance Sheet
     (in thousands, adjusted to the NIS of December 2000, audited)


                                                         Convenience
                                                         Translation
                                                           into US$
                                                         ------------
                     December 31,     December 31,       December 31,
                        2000             1999                2000
                    ------------     ------------        ------------

ASSETS
Current assets
Cash and cash
 equivalents         1,413               9,525                $350
Marketable
 securities         32,166              70,943              $7,960
Trade
 receivables       535,906             525,529            $132,617
Other accounts
 receivable and
 prepaid expenses   37,477              61,768(1)           $9,724
Inventories        291,908             303,027             $72,237
                  ------------     ------------        ------------
                   898,870             970,792            $222,438

Long-term Investments
Investments in
 affiliates         2,124              67,917                 $526
Long-term loan to
 joined controlled
 entities          23,068              10,136               $5,708
                 ------------      ------------        ------------
                   25,192              78,053               $6,234

Fixed assets    2,843,758           2,584,587             $703,726
Cost              827,793             730,421             $204,878
                 ------------     ------------        ------------
Less -accumulated
 depreciation   2,015,965           1,854,166            $498,878

Intangible assets
 and deferred charges,
 net              103,530             117,331            $ 25,619
                 ------------     ------------        ------------
                 3,043,557          3,020,342            $753,169
                 ============      ============        ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Short term credit
 from banks and
 others            328,128           367,666              $81,200
Trade payables     682,824           709,604             $168,974
Short-term loan
 from parent
 cooperative and
 current accounts    4,657           129,925               $1,152
Other accounts
 payable           245,196            225,742(1)          $60,677
                ------------       ------------        ------------
                 1,260,805          1,432,937            $312,003

Long-term liabilities,
 net of current maturites
Long-term loans
 from banks and
 others            290,041            187,600             $71,775
Debentures          31,570             55,584              $7,812
Deferred taxes      24,367             24,033              $6,030
Accrued severance pay,
 net                16,596             12,065              $4,107
                 ------------      ------------        ------------
                   362,574            279,282             $89,724

Minority interest  141,933            120,205             $35,123
                 ------------      ------------        ------------
Shareholders` equity
Share capital       49,184             49,184             $12,171
Additional paid in
 capital           693,165            693,165            $171,533
Retained earnings  535,896            445,569            $132,615
                   ------------      ------------        ------------
                  1,278,245          1,187,918           $316,319

                  3,043,557          3,020,342           $753,169
                   ============      ============        ============

(1) reclassified



                       Blue Square - Israel Ltd.
                        Selected Operating Data
         (in thousands, adjusted to the NIS of December 2000)

                                                         Convenience
                                                         Translation
                                                           into US$
              Three months ended       Year Ended        Three months
                  December 31,         December 31,      December 31,
                 2000       1999     2000        1999        2000
               -------    -------  -------      -------  -------------

Sales
 (in millions)  1,293      1,223    5,199        4,929     $320

Operating
 income
 (in millions)  66.0        44.5    271.3        221.0    $16.3

Number of
 stores
 (at end
 of period)      168         165      168          165       na
Stores added
 during the
 period            2           5        9           12       na
Stores closed
 during the period 3           1        6            5       na


Total square
 meters
(at end
 of period)    258,000      239,000  258,000      239,000    na
Additional
 square meters,
 net               900        7,650   19,000       19,100    na

Same store sales  -3.2%       -6.6%    -4.4%        -4.0%    na

Sales per square
 meter           5,021       5,195    20,851       21,773   $1,242

Sales per employee
 (in thousands)     170        169       701          679      $42

EBITDA
 (in millions)      109         77       412          340      $27

EBITDA Margin      8.4%        6.3%      7.9%        6.9%    na


    Note: EBITDA is defined as operating income before depreciation
        and amortization