Strong growth in Max Stock sales and increased profitability margins

The weakening of the dollar boosted Max Stock's profits in the second quarter. The discount store chain closed the quarter with an increase in sales, a sharp improvement in gross and operating profitability, and a 35.7% jump in net profit attributable to shareholders, which amounted to 32.6 million shekels. The company announced a dividend distribution of 50 million shekels.

Sales of the chain, which has 65 branches, 40 of which are self-operated, grew by 12.7% in the quarter to 379 million shekels. The growth was recorded even though this year the Passover holiday fell in the first quarter, while last year it fell in the second. It was driven by the opening of three new stores, a 7% growth in sales in identical stores, and a 2.8% increase in the average basket.

The decline in the dollar exchange rate boosted the company's gross profit by 21.3% to 178.4 million shekels, with the gross profitability rate climbing to 47.1% of sales, compared to 43.8% in the same quarter. Added to this were an improvement in trade terms and a decrease in logistics expenses following the move to a new logistics center.

An even sharper jump of 36% was recorded in operating profit, which amounted to 76.9 million shekels. This occurred despite the rate of sales and marketing expenses rising to 22.8% of sales due to increased salary and property tax (arnona) expenses. Conversely, the rate of administrative and general expenses fell to 4% of sales. The operating profit rate jumped to 20.3%, compared to 16.9% in the same quarter.

The decline in the dollar exchange rate, while boosting gross profitability, also expanded financing expenses by 42.5% to 35.5 million shekels due to losses from dollar hedging transactions. The company, which has future hedging transactions of 34.5 million dollars in 2027 and 26.3 million dollars in 2028, noted it may record additional financing expenses if the dollar continues to fall.

The company is expected to convene a shareholders' meeting next month to approve a change in compensation policy and update the terms of office for CEO Ori Max. The company also approved an equity compensation plan for 23 employees and 8 office holders. Meanwhile, VP of Logistics Alik Kaplan was promoted to Deputy CEO.

Ori Max, founder and CEO of Max Stock, stated:

"The results reflect the continued growth in the volume of visitors to the branches, alongside a constant upgrading of the product mix and the continued expansion of the chain. Since the beginning of the year, we have successfully launched new branches in Be'er Sheva and Or Akiva, as well as another franchisee store in Hod HaSharon, and we continue to work on expanding the national footprint, with a forecast to open 5 additional owned branches by the end of 2027".