Blue Square-Israel Ltd. (NYSE:BSI) today announced results for the first quarter ended March 31, 2000.

Revenues for the first quarter of 2000 were NIS 1,190.9 million (US$ 295.8 million)(a) compared to NIS 1,219.5 million(b) for the first quarter of 1999. First quarter revenues were affected by the timing of the Passover sales season, which fell during the second quarter of 2000, but during the first quarter of 1999. The Passover season increases sales for the relevant month by about 20%. Because of the timing of the Passover holidays, it is more accurate to compare the results of the first quarter sequentially with the results of the third and fourth quarters of 1999. Gross margins for the first quarter of 2000 were 28.0%, a slight improvement compared to 27.8% for the first quarter of 1999, and a significant sequential improvement compared to the gross margins of the third and fourth quarters of 1999, which were 26.4% and 27.0%, respectively.

The Company's first quarter 2000 operating profit was NIS 61.2 million (US$ 15.2 million) compared to NIS 77.2 million for the first quarter of 1999. Operating expenses were affected by mandatory increases in Israel's minimum wage beginning at the end of the first quarter of 1999. At the same time, the Company's overall cost structure has been reduced through a comprehensive efficiency program initiated during the fourth quarter of 1999. As a result, the Company's first quarter operating margins of 5.1% represent a significant sequential improvement as compared to operating margins of 3.9% recorded in the third quarter of 1999 and 3.6% recorded in the fourth quarter of 1999. The Company believes that its ongoing efficiency program will positively affect margins in the future.

Continuing its policy of focusing on its profitable food business, during the quarter the Company divested its holdings in Home Centers, resulting in a capital gain of NIS 21 million after tax. The capital gain was included in "Other Income."

Net profit for the quarter rose by 44.6% to NIS 42.4 million (US$ 10.5 million), or NIS 1.10 per ADS (US$ 0.27), compared to NIS 29.3 million, or NIS 0.76 per ADS for the first quarter of 1999.

During the quarter, same store sales, sales per employee, and sales per square meter declined as compared to the first quarter of 1999 due to the timing of the Passover holidays, the opening of new stores by the Company and its competitors, and the ongoing slowdown of the Israeli economy. Nevertheless, the Company's metrics show sequential improvement compared to the third and fourth quarters of 1999, reflecting progress due to the Company's efficiency program.

Commenting on the news, Yoram Dar, Blue Square's President and Chief Executive Officer, said, "The results of the first quarter validate the efficiency program we put into place at the end of the third quarter last year to reduce costs and improve revenues. We are on track in the program's implementation, and the positive results so far are in line with our expectations.

"The sequential operating margin improvement is a result of the initial success of an intense comprehensive cost-cutting program, which is focused on three key areas: human resources, self-distribution, and category management. Since the third quarter, 700 positions at every level of the organization, which represent approximately 9% of the Company's total workforce, have been eliminated - a painful but necessary process. We continue a number of activities to improve the utilization and efficiency of our central Logistics Center and distribution operations. In addition, we are nearing the successful completion of our first phase of our Category Management program. These are all ongoing programs which we expect to continue improving margins in the future.

"We continue to expand our initiatives aimed at increasing our revenues. After the quarter, we opened two new MEGA large-format discount stores, doubling the size of the chain. MEGA continues to be the best performing format in the Blue Square network, and we are on track with plans to open an additional 2-3 MEGAs by the end of the year. We continue to make preparations for the launch of an intensified Private Label program, and continue developing our strategy for a major e-commerce initiative within the framework of our Buy & Bonus customer loyalty club."

Mr. Dar concluded, "Overall, we are pleased with the results of the first quarter. We continue making progress according to the efficiency plan, and are confident that it will lead to continued improvement in the year ahead."

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 167 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 March 31, 2000: US $1.00 equals 4.026 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 decreased 1.2% for the three months ended March 31, 2000.


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

Convenience
Translation
into US$
--------
March 31, December 31, March 31,
2000 1999 2000
---- ---- ----
(Unaudited) (Audited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 2,514 9,409 624
Marketable securities and
short-term deposits 77,778 70,078 19,319
Trade receivable 561,853 519,120 139,556
Other accounts receivable
and prepaid expenses 69,983 53,615 17,383
Inventories 325,732 299,332 80,907
--------- --------- ---------
1,037,860 951,554 257,789
--------- --------- ---------

Long-term Investments
Investments in affiliates 1,249 67,089 310
Long-term loan to jointly
controlled entities 13,404 10,012 3,330
--------- --------- ---------
14,653 77,101 3,640
--------- --------- ---------

Fixed assets 2,616,448 2,553,068 649,888
Cost 739,970 721,513 183,798
--------- --------- ---------
Less -accumulated
depreciation 1,876,478 1,831,555 466,090
--------- --------- ---------

Intangible assets and
deferred charges, net 113,675 115,900 28,235
--------- --------- ---------

Total Assets 3,042,666 2,976,110 755,754
========= ========= =========


LIABILITIES AND
SHAREHOLDERS' EQUITY

Current liabilities
Short-term credit from
banks and others 289,450 363,183 71,895
Trade payables 706,427 700,950 175,466
Other accounts payable 316,006 215,590 78,492
Short term loan from
parent corporation 128,194 128,341 31,842
--------- --------- ---------
1,440,077 1,408,064 357,695
--------- --------- ---------

Long-term liabilities
Long-term loans from banks
and others 177,691 185,312 44,136
Debentures 47,915 54,906 11,901
Accrued severance pay, net 12,614 11,918 3,133
Deferred taxes 25,488 23,740 6,331
--------- --------- ---------
263,708 275,876 65,501
--------- --------- ---------

Minority interest 123,100 118,739 30,576
--------- --------- ---------

Shareholders` equity
Share capital 48,584 48,584 12,068
Additional paid in capital 684,712 684,712 170,073
Retained earnings 482,485 440,135 119,841
--------- --------- ---------
1,215,781 1,173,431 301,982
--------- --------- ---------

3,042,666 2,976,110 755,754
========= ========= =========



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

Convenience
Translation
into US$
-----------
Three
Three Months Ended Months
March 31, Ended
----------------------------
2000 1999 March 31,
------------ ----------- -----------
(unaudited) (unaudited) 2000
------------ ----------- -----------
Adjusted NIS (unaudited)
-------------------------- -----------

Sales 1,190,939 1,219,546 295,812
Cost of sales 857,273 880,822 212,934
----------- ----------- -----------
Gross profit 333,666 338,724 82,878

Operation and
admininistrative expenses 272,508 261,574 67,686
----------- ----------- -----------
Operating income 61,158 77,150 15,192

Financial expenses, net 13,648 17,260 3,390
----------- ----------- -----------
47,510 59,890 11,802

Amortization of goodwill (1,408) (1,385) (350)
Other income (expenses), net 28,709 (38) 7,132
----------- ----------- -----------

Income before taxes
on income 74,811 58,467 18,584
Taxes on income 28,430 21,186 7,063
----------- ----------- -----------

46,381 37,281 11,521

Equity in results of
affiliated, net of taxes 479 137 119
----------- ----------- -----------
46,860 37,418 11,640

Minority interest in earnings
of subsidiaries, net (4,510) (5,836) (1,120)
----------- ----------- -----------

Income from continuing
operations 42,350 31,582 10,520
----------- ----------- -----------

Discontinued operations,
net of taxes -- (2,300) --
----------- ----------- -----------

Net income for the period 42,350 29,282 10,520
=========== =========== ===========

Basic and diluted earnings
per ordinary share or per
ADS from continuing
operations 1.10 0.82 0.27
=========== =========== ===========

Basic and diluted earnings
per ordinary share or per
ADS from discontinued
operation -- (0.06) --
=========== =========== ===========

Basic and diluted earnings
per ordinary share or per
ADS (Adjusted NIS) 1.10 0.76 0.27
=========== =========== ===========

Weighted average no. of
shares or ADSs outstanding
during the period 38,400,000 38,400,000 38,400,000
=========== =========== ===========



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

Convenience
Translation
into US$
----
Three months
Three months Ended
ended March 31, March 31,
2000 1999 2000
---- ---- ----
Sales (in millions) 1,191 1,220 296

Operating income (in millions) 61.2 77.2 15

Number of stores (at end of period) 167 159 na

Total square meters (at end of period) 241,250 219,900 na

Same store sales -14.7% 9.7% na

Sales per sq. mtr 4,968 5,577 1,234

Sales per employee (in thousands) 161 181 40

EBITDA (in millions) 90 102 22

EBITDA Margin 7.6% 8.4% na

-- EBITDA is defined as operating income before depreciation and amortization