Leading Israeli retailer Blue Square Ltd today [Tuesday] announced results for the Q4 and FY ended 31 December 2001.
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Results of 2001
Full year revenues for 2001 were NIS5,577.5m, an increase of 5.8% compared to NIS5,272.3m for 2000.
Gross profit for 2001 increased by 5% to NIS1,521.5m from NIS1.449.2m for 2000. Gross margin for the period was 27.3% compared to 27.5% in 2000.
Operating income for 2001 increased by 10.2% to NIS303.1m from NIS275.1m in 2000. Operating margins for 2001 rose to 5.4%, compared to 5.2% for 2000, reflecting the company’s success in monitoring operating expenses and increased efficiency at all levels of the company’s operations.
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By GlobalData“Financing Expenses, Net” for 2001 were NIS12.5m, compared to NIS42.3m in 2000. The reduction derives primarily from changes in Israel’s CPI (Consumer Price Index), which increased by 1.4% in 2001 while remaining flat in 2000, and the reduction of the prime rate of interest regarding short- and long-term loans as established by the Bank of Israel.
“Other Income (Expenses), Net” for 2001 includes losses on sales and disposal of fixed assets, net, and a provision for impairment of fixed assets and goodwill. “Other Income” for 2000 consists mainly of a one-time capital gain related to the sale of the company’s holdings in Home Centers.
“Discontinued Operations” for 2000 includes expense of NIS2.5m which reflects the company’s share of the losses of the franchisee of IKEA Israel.
Net income for 2001 was NIS144.3m, or NIS3.76 per ADS. This represents a 32% increase over net income for 2000 excluding the abovementioned one-time capital gain and discontinued operations reported in 2000. Reported income for 2000 was NIS131.2m, or NIS3.48 per ADS.
During 2001, same store sales declined by 3.27% compared to 2000. For 2000, same store sales declined by 4.43% compared to 1999. The decline in same store sales reflects the slowdown of the Israeli economy, together with the continued competition that has resulted from the opening of new stores by the company and its competitors.
The company opened eight stores and closed five during 2001, adding a net total of 21,100 square meters to the chain.
EBITDA for 2001 increased by 9.7% to NIS441m from NIS402m in 2000, resulting in an EBITDA margin of 7.9%.
Results of the Q4
Revenues for the Q4 of 2001 increased by 3.2% to NIS1,353.6m from NIS1,311.7m in the fourth quarter of 2000.
Gross profit for the quarter increased by 0.8% to NIS375m from NIS372.1m in the Q4 of 2000. Gross margin for the quarter was 27.7%, compared to 28.4% in the Q4 of 2000.
Operating income for the Q4 increased by 5.7% to NIS70.8m from NIS66.9m in the Q4 of 2000, and operating margin increased to 5.2% from 5.1% for the corresponding period in 2000.
During the quarter, the company’s net financing expenses decreased to NIS7.6m from NIS13.6m in the Q4 of 2000.
Net income for the Q4 was NIS27.6m, or NIS0.72 per ADS, an increase of 20.1% compared with NIS23m, or NIS0.60 per ADS, for the Q4 of 2000.
Same Store Sales for the quarter declined by 5.9%. This reflects the continued competition in the sector and the slowdown in the economy. It also reflects the opening of regional MEGA branches which impacted the sales of the Company’s other stores in the same areas. Overall, the contribution of new MEGA branches was overwhelmingly positive; however, because they did not exist in 2000, their sales were not reflected in the comparison of Same Store Sales. In addition, because of the current security situation in Israel, there are fewer shoppers in malls, negatively affecting the Company’s stores located in malls.
EBITDA for the quarter increased by 4.9% to NIS108m from NIS103m in the Q4 of 2000. The EBITDA margin for the Q4 of 2001 increased to 8.0% from 7.8% in the Q4 of 2000.
Comments of Management
Commenting on the results, Yoram Dar, president and CEO, said: “Against a backdrop of recession and political uncertainty, I am proud to report a strong year for Blue Square, with 5.8% increase in sales, 10.2% increase in operating income, and important progress on all strategic fronts.
“The success reflects determined execution of strategies that address today’s more price-sensitive consumer base and maximize our operating flexibility.
“Already at the end of 2000, we understood the affect that political and economic developments would have on Israeli consumption. We narrowed our focus on what we have always done best: providing value for money. First, we emphasized MEGA, our deep-discount format, which offers the country’s lowest prices without sacrificing an exciting shopping experience. MEGA quickly became Israel’s most successful supermarket, and a significant driver of our sales and profits. In parallel, we reached even deeper with our cost-cutting and efficiency programs.
“As a result, while so many other organizations have reduced activities, fired employees, and cut salaries, Blue Square has continued to develop, expand, and flourish.”
Dar continued: “Looking ahead to 2002, it is reasonable to expect the economic and security situation to remain difficult. However, just as we were able to succeed throughout a challenging 2001, we are confident that we will continue to succeed.
“During 2002, we will intensify our execution of many of the same strategies that have proven themselves during the past year. We will continue to expand the chain, adding approximately ten new branches in various formats, representing a total of about 25,000-30,000 square meters. We will closely monitor all store formats to make sure they meet the needs of our dynamic markets, and will continue to strengthen MEGA while also launching new discount formats. A special emphasis will be placed on Leader Price, with the goal of increasing Private Label sales to 10% of total revenues by the end of the year.
“New initiatives will increase our sales. We have just launched the Blue Center Home Buying Network, a new concept which makes it easy to purchase from home by fax, Internet, or telephone. In the next few months, we plan to roll out a new customer club platform together with a Blue Square credit card which will become an important direct channel of communications with our customers.”
Dar concluded: “Overall, we are proud of our performance during a difficult year, and confident as we move into 2002. With proven strategies and exciting new initiatives, we are positioned to continue extending our market leadership.”
The board of directors declared today that a dividend of US$0.33 per ordinary share will be paid on 8 April 2002 to shareholders of record as of 1 April 2002.
In February 2002, the District Court of Tel Aviv ruled that the company’s major shareholder, the Co-Op Blue Square Cooperative Society, is allowed to convene a general meeting of its shareholders in order to confirm a proposal to sell its share in all of its subsidiaries, including Blue Square-Israel. The company believes that such a sale, which may increase the liquidity of its shares, is likely to occur during 2002.
