Max Stock Limited Reports Third Quarter 2023 Financial Results

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Nov 30, 2023, 01:31 ET

Revenue Increased 7.1% to ILS 314.5 Million

Gross Margin Increased 180 Basis Points to 41.9% GAAP Net Income (Attributable to Shareholders) Increased 17.9% to ILS 23.1 Million

CAESAREA, Israel, Nov. 30, 2023 /PRNewswire/ -- Max Stock Limited (TASE: MAXO) (the "Company") today reported financial results for third quarter ended September 30, 2023.

Third Quarter 2023 Summary

Revenue increased 7.1% to ILS 314.5 million compared to ILS 293.5 million.
Gross profit increased 12.0% to ILS 131.8 million.
Comparable store sales increased 1.5%.
GAAP Net income (attributable to shareholders) increased 17.9% to ILS 23.1 million.
Adjusted EPS1 (attributable to shareholders) increased 2.9% to ILS 0.17.
Adjusted EBITDA2 increased 7.9% to ILS 45.2 million.

First Nine Months 2023 Summary

Revenue increased 6.2%.
Comparable store sales increased 2.4%.
GAAP Net income (attributable to shareholders) increased 35.0%.
Adjusted EPS1 (attributable to shareholders) increased 9.7%.
Adjusted EBITDA2 increased 8.8%.

Ori Max, Founder and Chief Executive Officer, stated, "We concluded the third quarter with record sales resulting from an increase in customer traffic, along with continued growth in our retail space fueled by our branch expansion strategy. This strong topline growth in the third quarter, coupled with our strong first half of the year, has allowed us to expand net profit attributable to shareholders by approximately 35% through the first nine months of 2023.

While we are pleased with our operating results, they are overshadowed by the gravity of recent events. The State of Israel is currently in the midst of the "Swords of Iron" war which started on October 7. We fully support the IDF soldiers and defense forces currently fighting to restore security and peace for Israel's citizens. We share in the sorrow suffered by the families of fallen and injured soldiers and terror victims, and hope for the speedy return of the hostages taken captive.

From a business perspective, the Company's stores were closed in the early days of the war, and gradually opened over the following first and second weeks with a reduced scale of operations. Since the end of October, 60 of the Company's 62 stores in Israel are currently fully open and operating as usual. Over recent weeks, we have demonstrated tremendous operating flexibility to make the most relevant items available for our customers during this complicated period.

While we expect to see a resulting business impact near-term, we continue to focus on our growth strategies to expand the Company's operating activities, and made great progress on these initiatives in the third quarter. We signed a lease agreement for a new logistics center which will support the Company's growth plan, we launched new owned stores in Beerot Yitzhak and Bat Yam and we also opened a franchised branch in Jerusalem (Pisgat Zeev). In Portugal we also opened a third branch in the city of Matosinhos. Looking ahead, we anticipate opening new branches in Kiriat Gat and Yavneh in the upcoming months, and do not expect the current conflict to impact our growth plans. We are confident that the State of Israel will quickly revert to its path of accelerated growth and we are continuing our growth strategy to make Max Stock accessible to the largest possible customer base."

¹As used throughout this release, adjusted EPS (attributable to shareholders) defined as Net Income + Share-based payment, multiplied by the portion attributable to shareholders and divided by the number of shares.

²As used throughout this release, adjusted EBITDA Pre IFRS 16 defined as Net Income + Income Tax Expenses + Net Interest Expenses + D&A + Other Expenses – the impact of IFRS 16 + Share-based payment – IFRS 16.

Impact of Swords of Iron war on the Company's operations

The Swords of Iron war broke out in Israel on October 7^th, 2023 (the "war") following a surprise attack by the Hamas terror organization from Gaza against settlements in the western Negev. Hostilities of a lesser magnitude subsequently also broke out by the country's northern border. As of today, the war has had a material impact on the entire economy, among other things, due to the temporary shutdown of businesses primarily in areas in proximity to the fighting, across the broad call-up of military reserves, evacuation of residents from settlements in proximity to the fighting and partial interruptions of the education system.

The Company's stores were closed at the outbreak of the war, and as of October 9^th, 2023, and over the duration of approximately two weeks, gradually reopened with a reduced scope of operations.

Comparable store sales for the period July 1^st, 2023, until October 31^st, 2023, which includes the impact of the Jewish holidays period decreased 2.1%, primarily reflecting the temporary store closures and subsequent reduced operating schedule during the month of October due to the war.

From the end of October 2023 and as of today, 60 of the Company's 62 stores in Israel are currently fully open and operating as usual.

Third Quarter 2023 Results

Revenue was ILS 314.5 million in the third quarter 2023 as compared with revenue of ILS 293.5 million in the third quarter 2022. Revenue results in the period were driven by the addition of 3 new owned stores as well as 4 franchised stores, along with a 1.5% increase in comparable store sales. Gross profit increased 12.0% to ILS 131.8 million in the third quarter 2023 from ILS 117.7 million in the third quarter 2022. Gross margin was ~41.9% as compared to ~40.1% in the prior year period. The 180-basis point improvement in gross margin year-over-year was driven primarily by a decline in global shipping costs and a decrease in logistical expenses as a result of more efficient inventory management.

Selling, general and administrative expenses increased to ILS 87.7 million in the third quarter of 2023 from ILS 80.2 million in the third quarter of 2022. This increase was primarily driven by increased marketing and store maintenance expenses, along with depreciation of right of use assets under IFRS 16 due to the opening of new branches. Additionally, the launch of operating activities in Portugal in early 2023 increased selling, general and administrative expenses by approximately ILS 2.2 million compared to the prior-year period. Selling, general and administrative expenses as a percentage of net sales in Q3 2023 were 27.9% compared with 27.3% in Q3 2022.

Adjusted net income (attributable to shareholders) was ILS 23.2 million as compared to ILS 23.0 million in the third quarter of 2022.

Adjusted EPS (attributable to shareholders) increased 2.9% to ILS 0.17 in the third quarter of 2023 as compared with adjusted EPS (attributable to shareholders) of ILS 0.16 per share in the third quarter of 2022.

Adjusted EBITDA increased 7.9% to ILS 45.2 million in the third quarter of 2023 from ILS 41.9 million in the third quarter of 2022.

First Nine Months 2023 Results

Revenue was ILS 846.9 million in the first nine months of 2023 as compared with revenue of ILS 797.1 million in the first nine months of 2022. Revenue results in the period were driven by the addition of 3 new owned stores as well as 4 franchised stores, along with a 2.4% increase in comparable store sales.

Gross profit increased 11.7% to ILS 351.7 million in the first nine months of 2023 from ILS 314.7 million in the first nine months of 2022. Gross margin was ~41.5% as compared to ~39.5% in the prior year period. The 200-basis point improvement in gross margin year-over-year was driven primarily by a decline in global shipping costs and a decrease in logistical expenses as a result of more efficient inventory management.

Selling, general and administrative expenses increased to ILS 239.7 million in the first nine months of of 2023 from ILS 224.8 million in the first nine months of 2022. This increase was primarily driven by increased marketing and store maintenance expenses, along with depreciation of right of use assets under IFRS 16 due to the opening of new branches. Additionally, the launch of operating activities in Portugal in early 2023 increased selling, general and administrative expenses by approximately ILS 5.5 million compared to the prior-year period. Selling, general and administrative expenses as a percentage of net sales in the first nine months of 2023 were 28.3% compared with 28.2% in the first nine months of 2022.

Adjusted net income (attributable to shareholders) was ILS 60.1 million as compared to ILS 56.0 million in the first nine months of 2022.

Adjusted EPS (attributable to shareholders) increased 9.7% to ILS 0.43 in the first nine months of 2023 as compared with adjusted EPS (attributable to shareholders) of ILS 0.39 per share in the first nine months of 2022.

Adjusted EBITDA increased 8.8% to ILS 112.1 million in the first nine months of 2023 from ILS 103.1 million in the first nine months of 2022.

Balance Sheet and Cash Flow Highlights

The Company's cash and cash equivalents balance at September 30, 2023 was ILS 119.9 million compared with ILS 80.5 million at December 31, 2022 and ILS 82.6 million at September 30, 2022. The Company ended the third quarter of 2023 with total debt of ILS 31.1 million compared with total debt of ILS 47.6 million at the end of fiscal 2022.

Inventories at September 30, 2023 were ILS 148.6 million, down 6.8% compared with ILS 159.4 million at December 31, 2022 and down 10.9% compared with ILS 166.8 million at September 30, 2022.

Conference Call Information

The Company will host a conference call on November 30, 2023 at 8:00 a.m. Eastern Standard Time to discuss third quarter fiscal 2023 results (link). The conference call will also be accessible at https://ir.maxstock.co.il/en/event-en/.There will be a slide presentation that accompanies the call. The slides will be accessible at https://ir.maxstock.co.il/en/presentation-en/. An archived webcast of the conference call will be available at https://ir.maxstock.co.il/en/presentation-en/.

About Max Stock
Max Stock is Israel's leading extreme value retailer, currently present in 62 locations throughout Israel and 3 locations in Portugal that opened in 2023. We offer a broad assortment of quality products for customers' everyday needs at affordable prices, helping customers "Dream Big, Pay Small". For more information, please visit https://ir.maxstock.co.il

Forward-Looking Statements

It should be emphasized that this report includes forward-looking information as defined under the Securities Law, 5728-1968. Forward-looking information is uncertain information regarding the future, including forecasts, projections, estimates or other information which refer to a future event or matter, the eventuation of which is uncertain and/or not within the Company's control. The forward-looking information included in this report is based on the current information held by the Company or its current assessments, as of the publication date of this report.

Company Contacts:
Talia Sessler,
Chief Corporate Development and IR Officer
[email protected]

SOURCE Max Stock Limited