Blue Square, the Israeli supermarket operator, has seen its 2008 profits slide on the back of higher costs as it rolled out two new formats.

The company, which runs 199 stores in Israel, said net income stood at NIS132.4m (US$32.6m) for 2008, down from NIS175.8m a year earlier.

Operating income was down 6.9% at NIS281.8m, Blue Square said yesterday (23 March).

The retailer revealed that earnings from stores converted to its Mega Bool format fell, while the group also incurred costs from the roll out of its Eden Teva Market stores.

Revenues rose 6.4% to NIS6.98bn thanks to contributions from 20 new stores but also a 1.1% increase in same-stores sales.

President and CEO Zeev Vurembrand said 2008 had been a "complex and challenging year" for the business.

Vurembrand said Blue Square would look at rolling out its Mega Bool and Eden Teva Market stores further across Israel this year, as well as expanding its private-label ranges.

"2009 promises to be a challenging year given today's macro-environment. However, the completion of the organizational structure positions us in the most efficient structure for today's spirit of times and to future yet to come," Vurembrand said.