Blue Square - Israel Ltd. Announces Financial Results for the Third Quarter and First Nine Months of 2009

Completion of Deploying the Company's Branches in an Accurate Chain Structure and Adjusted to the Market Condition 


ROSH HA'AYIN, Israel, November 25  /PRNewswire-FirstCall/ -- 

  - Expansion of the Private Brand "Mega ", Reaching 6% of the Sales,
    Starting to Yield Fruits




Blue Square Reports stability in the Operating Profit Despite the Increased Competition and One-Time Expenses

The Successful Launch of the Loyalty Club Resulted in the Enrollment of 350,000 New Club Members in the Third Quarter and in the Aggregate the Club has 500,000 Members.

The Company Announces the Commencement of the Second Stage in the Development of "Eden Teva Market" Chain Planning to Open "Eden" Branches in the Company Stores Under the Concept of "Store Within a Store" Blue Square-Israel Ltd. (NYSE and TASE: BSI) today announced its financial results for the third quarter and nine months ended September 30, 2009.

Results for the third quarter of 2009

Revenues for the third quarter of 2009 were NIS 1,925.5 million (U.S.(A) $512.4 million), compared to NIS 1,936.2 million in the corresponding quarter of 2008 - a decrease of 0.6 %. Supermarket same store sales (SSS) for the period decreased by 2.5% (compared to a decrease of 6.8% in sales in SSS in the first half) due to the recession in the market, increased competition and erosion of the sales prices in HD chains. On the other hand, the decrease in sales was offset by the net addition of nine new stores during the last 12-month period of approximately 8,000 square meters;

Gross Profit of the third quarter of 2009 amounted to NIS 533.2 million (U.S. $ 141.9 million) (27. 7 % of revenues) compared to gross profit of NIS 538.8 million (27.8% of revenues) in the corresponding quarter of 2008. The decrease in the gross profit margin derives from an increase in the relative scope of sales of the HD chains of total sales that were offset from the improvement of trade agreements and supplier discounts and from the contribution of the private brand of "Mega", which already accounts for 6% of total sales.

Selling, General, and Administrative Expenses for the third quarter of 2009 amounted to NIS 474.4 million (U.S. $ 126.2 million) (24.6% of revenues) compared to NIS 478.8 million (24.7% of revenues) in the corresponding period, a decrease of 0.9%. The decrease reflects the effect of efficiency measures taken by the company during the quarter which was mitigated by 1)increased expenses associated with the net addition of nine new stores, including the expenses associated with the accelerated opening of five branches of the "Eden Teva Market" format during the last twelve months 2) enrollment costs of a new phase of the "You" club 3) costs deriving from the increase in the expenses of the private brand 4) increase of the CPI, which affects expenses of rental fees and municipal taxes.

Operating Income (before changes in fair value of investment property and other gains and losses) in the third quarter of 2009 amounted to NIS 58.7 million (U.S $ 15.6 million) (3.1% of revenues) compared to the operating income of NIS 60.0 million (3.1% of revenues) in the corresponding period.

Changes in fair value of Investment Property: In the third quarter of 2009, the Company recorded gain from appreciation of investment property in the amount of NIS 6.7 million (U.S $ 1.8 million). In the corresponding period of the previous year, no change in the value of investment property was recorded.

Other Gains and Losses, Net: In the third quarter of 2009, the Company recorded other expenses, net of NIS 4.9 million (U.S. $ 1.3 million), compared to net income of NIS 11.1 million in the corresponding period. The expenses this quarter included costs of NIS 2.4 million (U.S $ 0.6 million) relating to the transaction of transferring real estate properties from Mega Retail Ltd. to Blue Square Real Estate and costs associated with the synergy of headquarters in BEE group amounting to NIS 0.8 million (U.S $ 0.2 million). In the corresponding quarter, mainly derives from decrease in holding rate in companies held by BEE Group due to reorganization.

Operating Income before financing in the third quarter of 2009 was NIS 60.5 million (U.S. $ 16.1 million) (3.1% of revenues) compared to operating income of NIS 71.1 million (3.7% of revenues) in the third quarter of 2008.

Financial Expenses (net) for the third quarter of 2009 were NIS 44.7 million (U.S. $11.9 million) compared to financial expenses (net) of NIS 50.1 million in the corresponding quarter of the previous year. The decrease in financial expenses in this quarter compared to the corresponding quarter last year mainly derives from financial income from derivative financial instruments that contributed in this quarter an income of NIS 7.0 million (U.S $1.9 million) compared to an expense of NIS 6.4 million in the corresponding quarter last year and from financial income from marketable securities that contributed this quarter an income of NIS 3 million compared to an expense of NIS 3 million in the corresponding quarter. The decrease in the financial expenses was offset mainly as a result of the increase in financial expenses on long term loans and debentures in the amount of NIS 15.6 million this quarter compared to the corresponding quarter.

Taxes on Income for the third quarter 2009, tax benefit amounted to NIS 13.9 million (U.S. $3.7 million) (net of tax benefit in respect of the changes in tax rates as detailed below of NIS 20.3 million the effective tax rate was 40.9% compared to a statutory tax rate of 26%) compared to tax expenses of NIS 8.9 million (effective tax rate of 42.6% compared to a statutory tax rate of 27%) in the corresponding quarter. The change of tax expenses in the corresponding quarter to tax benefit this quarter mainly derives from recording tax benefit due to the decrease in deferred tax liabilities following the change in tax rates, as a result of the legislation of the Law for Economic Efficiency (Legislation Amendments for the Implementation of Economic Plan for 2009- 2010) 5769 - 2009, which prescribed, among others, the gradual decrease of corporate tax rate down to 18% in the 2016 tax year and onwards.

The implication of the change in the tax rates were reflected in the results of the third quarter of 2009 by a decrease in deferred tax liability and a recognition in income from taxes in the amount of NIS 20.3 million (U.S $ 5.4 million) out of which the portion attributed to the company's shareholders is NIS 15.2 million (U.S $ 4.0 million).

Net Income for the third quarter of 2009 was NIS 29.6 million (U.S. $ 7.9 million) compared to net income of NIS 12.0 million in the third quarter of 2008. The increase in the net income in this quarter compared to the corresponding quarter last year derives from tax benefit offsetting decrease in operating income, as mentioned above. The net income for the third quarter of 2009 attributable to shareholders, was NIS 25.1 million (U.S. $6.7 million), or NIS 0.57 per ADS (U.S. $ 0.15), while the portion attributable to the share of minority interests was NIS 4.5 million (U.S. $1.2 million).

Cash Flows in the third quarter of 2009

Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the third quarter of 2009 amounted to NIS 173.7 million (U.S. $ 46.2 million) compared to NIS 59.5 million in the corresponding quarter last year. The increase in cash flows from operating activities derives from increase in the negative working capital balances, decrease in paid taxes and was offset from decrease in operating income.

Cash Flows from Investing Activities: Net Cash flows proceeds from investing activities in the third quarter of 2009 amounted to NIS 307.3 million (U.S. $81.8 million) compared to net cash flows of NIS 73.3 million used in investing activities in the corresponding quarter last year. Cash flows proceeds from investing activities in the third quarter of 2009 included mainly realization of short term deposits of NIS 389.3 million (U.S. $103.6 million) net of cash used in investing activities for purchase of property and equipment, intangible assets and investment property in a total amount of NIS 72.5 million (U.S. $19.3 million) and net investment in marketable securities of NIS 12.2 million (U.S. $3.2 million). Cash used in investing activities in the third quarter of 2008 mainly included the purchase of property and equipment in a total amount of NIS 52.3 million and purchase shares of minority interests in subsidiaries in the amount of NIS 35.4 million.

Cash Flows from Financing Activities: Net Cash flows used in financing activities in the third quarter of 2009 amounted to NIS 167.4 million (U.S $ 44.5 million) compared to net cash provided by financing activities of NIS 98.8 million in the corresponding period last year. Cash flows used in financing activities in the third quarter of 2009 included mainly decrease in short term credit of NIS 380.3 million (U.S $ 101.2 million), repayment of long term loans of NIS 31.9 million (U.S $ 8.5 million), dividend paid to minority in subsidiaries in the amount of NIS 7.3 million (U.S $ 1.9 million), repayment of convertible debentures of NIS 13.3 million (U.S $ 3.5 million) and interest paid in the amount of NIS 35.2 million (U.S $ 9.4 million) net of receipt of long term loans amounting to NIS 301 million (U.S $ 80.1 million). Cash flows provided by financing activities in the third quarter of 2008 mainly included receipt of long term loans of NIS 172.5 million and increase in short term bank credit of NIS 25 million net of cash used in financing activities for repayment of long term loans of NIS 56.5 million, dividend paid to minority in subsidiaries of NIS 11 million and interest paid in the amount of NIS 30.8 million.

Comments of Management

Commenting on the financial results, Mr. Zeev Vurembrand, Blue Square's President and CEO, said: "2009 is marked by strategic measures with long term impact, which will shape the image and performance of the company in the coming years: the adjustment of the chains and the sub-brands through the establishment of Mega Bool Chain, the entry into the private brand segment and the launch of renewed loyalty club. In addition, during 2009 we performed a procedure of increasing operating efficiency and structural change which costs were charged to statement of operations.

In "Teva Eden Market" we completed Stage A of opening 9-10 branches. In Stage B, we intend to open approximately 6 Eden branches during the next two years inside the Mega branches, as a store within a store. In BEE retail group, during the next two quarters the synergy process of the headquarters will be finalized and the new logistic center will commence its operations during the second half of 2010. "Mega Bool" brand positions itself as a strong and leading brand in the HD segment in shorter time than expected. In conclusion, we began to see the fruits of the strategy, which was first implemented a year ago and we expect that the new actions will continue to impact the results of the company in the coming quarters".

  Additional Information

  1. As of September 30, 2009, the Company operated 203
     supermarkets in the following formats: Mega In Town -119;
     Mega Bool - 47; Mega - 11; Shefa Shuk - 17; Eden Teva Market - 9.

  2. EBITDA (Earnings before Interest, Taxes, Depreciation, and
     Amortization)
     In the first nine months of 2009, the EBITDA was NIS 311.7
     million (U.S. $ 83 million) (5.6 % of revenues) compared to NIS 344.0
     million (6.1% of revenues) in the corresponding period of last year.
     In the third quarter of 2009, amounted to NIS 106.5 million
     (U.S. $ 28.4 million) (5.5 % of revenues) compared to NIS 104.3
     million (5.4% of revenues) in the corresponding quater of last year.

     As of September 30, 2009, the ratio of its net financial
     obligations to EBITDA was 3.6 and the ratio of its unpledged
     property and equipment to the net financial obligations was 1.7.




Use of financial measures that are not in accordance with Generally Accepted Accounting Principles

EBITDA is a measure that is not in accordance with Generally Accepted Accounting Principles (Non- GAAP) and is defined as income before financial income (expenses) net, other gain (losses) net, changes in fair value of investment property, taxes, depreciation and amortization. It is presented because it is a measure commonly used in the retail industry and is presented as an additional performance measure, since it enables comparisons of operating performances between periods and companies while neutralizing potential differences resulting from changes in capital structures, taxes, age of property and equipment and its related depreciation expenses. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of our operating performance. Similarly, EBITDA should not be considered as an alternative to cash flow from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under Generally Accepted Accounting Principles (GAAP) and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of our historic operating results nor is it meant to be predictive of potential future results. Reconciliation between our income for the period and EBITDA is presented in the attached condensed financial reports.

  3. On October 1, 2009, Standard & Poors Maalot ratified the
     rating of ilA+ for the debentures Series A and B of the company
     and updated the rating forecast from stable to negative.

  Data in NIS (millions)
  Data                   Q3 2009    Q3 2008     1-9 2009     1-9 2008

  Sales                  1,925.5    1,936.2      5,534.2      5,675.8
  Gross profit             533.2      538.8      1,538.0      1,569.9
  % Gross profit            27.7%      27.8%        27.8%        27.7%
  Operating profit
  (before
  increase in fair
  value of real estate)     58.7       60.0        179.6        221.0
  % Operating profit
  (before
  increase in fair
  value of real
  estate)                    3.1%       3.1%         3.2%         3.9%
  Financial expenses        44.7       50.1         92.0         98.6
  Net income                29.6       12.0         79.4        114.3

  Events During the third Quarter of 2009


Reorganization of real estate activity - transfer of real estate properties to the subsidiary Blue Square Real Estate Ltd.

In September 2009, the reorganization plan of the real estate activity of the company and its centralization under the subsidiary (78.45%) Blue Square Real Estate (BSRE), was completed under which the real estate properties of the subsidiary Mega Retail Ltd. ( formerly Blue Square Chain Investment & Properties Ltd) (Mega Retail), were transferred to BSRE.

Within the approval of the property transfer transaction the following were approved as well:

1. Lease agreement to lease the transferred properties that are not leased to third parties to Mega Retail for ten years from the closing date of the purchase agreement and an option to the lessee to extend the lease agreement for five additional years, and,

2. An agreement to extend the term of the existing lease agreements between Mega Retail and BSRE to an identical period (ten years from the closing date of the purchase agreement and an option to the lessee to extend the lease agreement for five additional years).

The completion of the transaction was performed as a of split pursuant to Section 105 to the Income Tax Ordinance which confers upon Mega Retail an exemption from the payment of land appreciation tax at this stage and its deferment under the split agreement with BSRE until the realization of the properties (as far as realized) or by the depreciation rate of the depreciable properties by BSRE. In addition, the payment of purchase tax for the transaction will be at a reduced tax rate of 0.5%.

The company and the subsidiaries, Mega Retail and BSRE will be subject to the restrictions prescribed by the provisions regarding the split pursuant to Section 105 to the Ordinance.

BSRE pledged certain of the transferred properties as collateral for a loan taken in order to finance the transaction. Transaction costs including purchase tax were recorded as expense in the statement of operations.

Results for the first nine months of 2009

Revenues for the first nine months of 2009 were NIS 5,534.2 million (U.S $1,472.6 million), compared to NIS 5,675.8 million in the corresponding period of 2008 - a decrease of 2.5 %. Supermarket same store sales (SSS) for the period decreased by 5.5% due to the recession and increased competition and erosion of prices in HD chains. On the other hand, the decrease in sales was offset by the net addition of nine new stores during the 12-month period of approximately 8,000 square meters.

Gross Profit in the first nine months of 2009 amounted to NIS 1538.0 million (U.S. $ 409.3 million) (27.8 % of revenues) compared to gross profit of NIS 1,569.9 million (27.7% of revenues) in the corresponding period of 2008. The increase in the gross profit derives from an increase in sales of BEE group characterized with relatively higher gross profit margins relative to the acceptable gross profit in the area of food retailing. In addition, the gross profit increased from trade agreements, some of which relate to the establishment of Mega Bool chain that offset the effect of the planned erosion in the gross profit margin as a result of establishing the chain.

Selling, General, and Administrative Expenses in the first nine months of 2009 amounted to NIS 1,358.4 million (U.S. $ 361.4 million) (24.5% of revenues) compared to NIS 1,348.9 million (23.8% of revenues) in the corresponding period, an increase of 0.7%. The increase reflects increase in expenses deriving from 1) net addition of 9 new stores, part of which relate to accelerated opening of 5 branches of the "Eden Teva Market" during the last 12 months 2) costs associated with launch of "Mega Bool" chain. 3) enrollment costs of a new phase of the "You" club 4) increase of the CPI, which affects expenses of rental fees and municipal taxes. On the other hand, the company took efficiency measures which resulted in decrease in payroll and related expenses. This decrease was offset in one time costs of NIS 9 million.

Operating Income (before changes in fair value of investment property and other gains and losses) in the first nine months of 2009 amounted to NIS 179.6 million (U.S $ 47.8 million) (3.2% of revenues) compared to the operating income of NIS 221.0 million (3.9% of revenues) in the corresponding period. The decrease in operating income was effected by the decrease in sales and increase in selling and administrative expenses, as mentioned above.

Changes in fair value of Investment Property in the first nine months of 2009, the Company recorded gain from appreciation of investment property of NIS 8.4 million (U.S $ 2.2 million) compared to NIS 18.0 million in the corresponding period of the previous year.

Other Gains and Losses, Net in the first nine months of 2009, the Company recorded other expenses, net of NIS 5.6 million (U.S. $ 1.5 million), compared to other expenses of NIS 9.3 million in the corresponding period of the previous year. The expenses included, in this period, provision for impairment of property and equipment in Dr. Baby stores in the amount of NIS 3.7 million (U.S. $ 1.0 million) and costs of NIS 2.4 million (U.S. $ 0.6 million) related to the transaction of transferring real estate properties from Mega Retail to BSRE and were offset by the capital gain in the amount of NIS 0.3 million (U.S. $ 0.1 million) from selling 1.55% of the shares of Blue Square Real Estate for NIS 10.1 (U.S. $ 2.7 million) and from capital gain of NIS 2.8 million (U.S. $ 0.7 million) from the purchase of 8% of Naaman shares held by minority. In the corresponding period, income mainly included gain from decrease in holding rate in companies held by BEE group due to the reorganization.

Operating Income before financing in the first nine months of 2009, was NIS 182.4 million (U.S. $ 48.5 million) (3.3% of revenues) compared to operating income of NIS 248.3 million (4.4% of revenues) in the corresponding period in 2008.

Financial Expenses (net) in the first nine months of 2009 were NIS 92.0 million (U.S. $24.5 million) compared to financial expenses (net) of NIS 98.6 million in the corresponding period of the previous year. The decrease in financial expenses in the current period compared to the corresponding period last year mainly derives from the effect of the change in the value of derivative financial instruments that contributed in the current period to an income of NIS 25 million (U.S $6.6 million) compared to an income of NIS 8.3 million in the corresponding period last year net of increase in the net financial debt of the company in the current period compared to the corresponding period last year which resulted in increase in short term financial expenses by NIS 10.7 million (U.S $2.8 million) in the current period compared to the corresponding period last year.

Taxes on Income in the first nine months of 2009 were NIS 10.9 million (U.S. $2.9 million) (12.1% effective tax rate compared to a statutory tax rate of 26%) compared to NIS 35.4 million (effective tax rate of 23.7% compared to a statutory tax rate of 27%) in the corresponding period. The decrease in the effective tax rate in this period compared to the corresponding period last year derives mainly from recording tax benefit due to the decrease in deferred tax liabilities following the change in tax rates, as a result of the legislation of the Law for Economic Efficiency (Legislation Amendments for the Implementation of Economic Plan for 2009- 2010) 5769 - 2009, which prescribed, among others, the gradual decrease of corporate tax rate down to 18% in the 2016 tax year and onwards. The implication of the change in the tax rates were reflected in the results of this period by decrease in deferred tax liability and recognition in income from taxes in the amount of NIS 20.3 million (U.S $ 5.4 million) out of which the portion attributed to the company's owners is NIS 15.2 million (U.S $ 4.0 million).

Net Income for the first nine months of 2009 was NIS 79.4 million (U.S. $ 21.1 million) compared to net income of NIS 114.3 million in the corresponding period of 2008. The decrease in the net income in the first nine months of the year compared to the corresponding period last year derives from a decrease in operating income and a decrease in income from appreciation of investment property net of a decrease in income tax expenses, as mentioned above. The net income for the first nine months of 2009, attributable to shareholders, was NIS 64.7 million (U.S. $17.2 million), or NIS 1.49 per ADS (U.S. $ 0.40), while the portion attributable to the share of minority interests was NIS 14.7 million (U.S. $3.9 million).

Cash Flows in the first nine months of 2009

Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the first nine months of 2009 amounted to NIS 331.7 million (U.S. $ 88.2 million) compared to NIS 337.7 million in the corresponding period last year. The decrease in cash flows from operating activities derives mainly from a decrease in operating income, and part of which was offset from a decrease in net taxes paid.

Cash Flows from Investing Activities: Net Cash flows used in investing activities in the first nine months of 2009 amounted to NIS 169.2 million (U.S. $45 million) compared to net cash flows of NIS 111.8 million used in investing activities in the corresponding period last year. Cash flows used in investing activities in the first nine months of 2009 included mainly purchase of property and equipment, intangible assets and investment property of NIS 177.4 (U.S $ 47.3 million) and net investment in marketable securities of NIS 9.4 million (U.S $ 2.5 million) net of cash flows proceeds from realization of property and equipment and investment property in a total amount of NIS 7.7 million (U.S.$2 million) and proceeds from realization of investment in a subsidiary in the amount of NIS 10.1 million (U.S. $2.6 million). Cash flows used in investing activities in the first nine months of 2008 included mainly purchase of property and equipment, intangible assets and investment property amounting to NIS 208 million, net proceeds in marketable securities in the amount of NIS 11.1 million and investment in subsidiary in the amount of NIS 35.4 million, net of proceeds from realization short term deposits of NIS 101 million and interest received of NIS 12.3 million.

Cash Flows from Financing Activities: Net Cash flows deriving from financing activities in the first nine months of 2009 amounted to NIS 198.6 million (U.S $ 52.9 million) compared to net cash provided by financing activities of NIS 31.4 million in the corresponding period last year. Cash flows deriving from financing activities in the first nine months of 2009 included mainly increase in short term credit of NIS 96.2 million (U.S $ 25.6 million) and receipt of long term loans of NIS 307.5 million (U.S $ 81.8 million) net of cash flows used for repayment of long term loans of NIS 98.2 million (U.S $ 26.1 million) repayment of convertible debentures of NIS 13.3 million (U.S $ 3.5 million) dividend paid to minority in subsidiary in the amount of NIS 13.5 million (U.S $ 3.6 million) and paid interest of NIS 81 million (U.S $ 21.6 million). Net Cash flows deriving from financing activities in the first nine months of 2008 included mainly receipt of long term loans of NIS 186.2 million and short term bank credit of NIS 41.6 million, net of repayment of long term loans of NIS 102.6 million, interest paid of NIS 70.5 million and dividend paid to minority in subsidiaries of NIS 22 million.

NOTE A: Convenience Translation to Dollars

The convenience translation of New Israeli Shekel (NIS) into U.S. dollars was made at the exchange rate prevailing at September 30, 2009: U.S. $1.00 equals NIS 3.758. The translation was made solely for the convenience of the reader.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 204 supermarkets under different formats, each offering varying levels of service and pricing.

This press release contains forward-looking statements within the meaning of safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, plans or projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events, results, performance, circumstance and achievements to be materially different from any future events, results, performance, circumstance and achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the following: the effect of the recession in Israel on the sales in our stores and on our profitability; our ability to compete effectively against low-priced supermarkets and other competitors; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; risks associated with our dependence on a limited number of key suppliers for products that we sell in our stores; the effect of an increase in minimum wage in Israel on our operating results; the effect of any actions taken by the Israeli Antitrust Authority on our ability to execute our business strategy and on our profitability; the effect of increases in oil, raw material and product prices in recent years; the effects of damage to our reputation or to the reputation to our store brands due to reports in the media or otherwise; and other risks, uncertainties and factors disclosed in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks, uncertainties and factors identified under the heading "Risk Factors" in our Annual Report on Form 20-F for the year ended December 31, 2008. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for our ongoing obligations to disclose material information under the applicable securities laws, we undertake no obligation to update the forward-looking information contained in this press release.

                          BLUE SQUARE - ISRAEL LTD.
                CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
                          AS OF SEPTEMBER 30, 2009
                                 (UNAUDITED)
                                                               Convenience
                                                             translation(a)
                             December           September 30,   September
                             31, 2008        2008         2009   30, 2009
                           __________    _________  __________  __________
                              Audited                 Unaudited
                           __________    _________________________________
                                            NIS                U.S.dollars
                           ___________________________________ ___________
       A s s e t s                            In thousands
                           _______________________________________________

  CURRENT ASSETS:
  Cash and cash
  equivalents                  95,325      313,738     445,085     118,437
  Marketable securities       171,849      176,964     188,909      50,268
  Bank deposits                   206          650         864         230
  Trade receivables           729,970      896,191     798,286     212,423
  Other accounts
  receivable                   87,624      408,558     292,066      77,718
  Derivative financial
  instruments                       -            -       1,513         403
  Income taxes receivable      74,446       67,339      84,520      22,491
  Inventories                 497,080      511,755     534,628     142,264
                           __________    _________  __________  __________
                            1,656,500    2,375,195   2,345,871     624,234
                           __________    _________  __________  __________
  NON-CURRENT ASSETS:
  Investment in
  associates                    4,915        4,930       4,787       1,274
  Derivative financial
  instruments                   5,248          850      21,106       5,616
  Prepaid expenses in
  respect of operating
  lease                       192,426      195,186     189,526      50,433
  Other long term
  receivables                   1,554        4,158       1,394         371
  Property and equipment,
  net                       1,701,222    1,673,245   1,765,853     469,892
  Investment property         434,232      409,297     437,354     116,379
  Intangible assets and
  deferred charges            404,422      345,116     402,775     107,178
  Deferred taxes               44,508       36,695      43,647      11,614
                           __________    _________  __________  __________
                            2,788,527    2,669,477   2,866,442     762,757
                           __________    _________  __________  __________
  Total assets              4,445,027    5,044,672   5,212,313   1,386,991
                           __________    _________  __________  __________


                          BLUE SQUARE - ISRAEL LTD.
                CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
                          AS OF SEPTEMBER 30, 2009
                                 (UNAUDITED)
                                                               Convenience
                                                                  transla
                                                                  tion(a)
                                  December      September 30,    September
                                  31, 2008      2008      2009    30, 2009
                                __________  ________ _________  __________
                                  Audited        Unaudited          U.S.
                                                                  dollars
                                __________________________________________
                                                    In thousands
                                __________________________________________

  Liabilities and shareholders'
             equity

  CURRENT LIABILITIES:
  Credit and loans from banks
  and others                       210,901   213,739   309,643      82,396
  Current maturities of
  debentures and convertible
  debentures                        25,999    21,501    75,811      20,173
  Trade payables                 1,006,386 1,197,281 1,199,366     319,150
  Other accounts payable          *426,217 613,380   617,291     164,261
  Income taxes payable               6,933     5,846     4,061       1,081
  Dividend payable                       -   150,000         -           -
  Provisions for other
  liabilities                       43,397    36,756    42,920      11,421
                                __________  ________ _________  __________
                                 1,719,833 2,238,503 2,249,092     598,482
                                __________  ________ _________  __________
  LONG-TERM LIABILITIES:
  Loans from banks, net of
  current maturities               341,586   339,672   542,400     144,332
  Convertible debentures, net
  of current maturities            130,525   134,320   141,004      37,521
  Debentures, net of current
  maturities                       985,844 1,009,180   953,256     253,660
  Other liabilities                 39,925    35,160    23,503       6,254
  Derivatives financial
  instruments                     *21,074    6,316     8,361       2,225
  Liabilities in respect of
  employee benefits, net            49,911    39,125    48,757      12,974
  Deferred taxes                    60,327    54,864    43,063      11,459
                                __________  ________ _________  __________
                                 1,629,192 1,618,637 1,760,344     468,425
                                __________  ________ _________  __________
        Total liabilities        3,349,025 3,857,140 4,009,436   1,066,907
                                __________  ________ _________  __________
  SHAREHOLDERS' EQUITY:
  Share capital -
  Ordinary shares of NIS 1 par
  value                             57,094    57,094    57,438      15,284
  Additional paid-in capital     1,018,405 1,018,405 1,030,259     274,151
  Other reserves                      (261)    1,176    10,904       2,902
  Accumulated deficit             (154,719) (161,407)  (81,089)    (21,578)
                                __________  ________ _________  __________
                                   920,519   915,268 1,017,512     270,759

  Minority interest                175,483   272,264   185,365      49,325
                                __________  ________ _________  __________
  Total equity                   1,096,002 1,187,532 1,202,877     320,084
                                __________  ________ _________  __________
  Total liabilities and
  shareholders' equity           4,445,027 5,044,672 5,212,313   1,386,991
                                ==========  ======== =========  ==========


  (*) Reclassified, under the application of
  IAS1(R). The company classified financial liabilities at fair value
  through the statements of operations from current liabilities to long
  term liabilities.

                         BLUE SQUARE - ISRAEL LTD.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009

                                   For the
                 Year ended      Three months
                   December  Ended September 30,
                   31, 2008     2008       2009
                 __________  _________  _________
                    Audited       Unaudited
                 __________  ____________________
                                     NIS
                 ________________________________
                       In thousands (except share
                       and per share data)
                 ________________________________
  Revenues from
  sales, net      7,429,121   1,936,236  1,925,473
  Cost of sales   5,369,149   1,397,451  1,392,320
                 __________   _________   _________
  Gross profit    2,059,972     538,785    533,153

  Selling,
  general and
  administrative
  expenses        1,794,720     478,815    474,420
                 __________   _________   _________
  Operating
  profit before
  changes in
  fair value of
  investment
  property and
  other gains
  and losses        265,252     59,970      58,733

  Other gains        12,233     11,841           -
  Other losses       14,716        734       4,927
  Changes in
  fair value of
  investment
  property, net      19,06          -        6,650
                 __________  _________    _________
  Operating
  profit            281,836     71,078      60,456

  Finance income     60,700     10,738      18,405
  Finance
  expenses         (166,295)   (60,874)    (63,138)
  Share in
  losses of
  associates            (33)        (1)        (40)
                 __________  _________    _________
  Income before
  taxes on
  income            176,208     20,940      15,683
  Taxes on
  income (tax
  benefit)           43,806      8,941     (13,887)
                 __________  _________    _________
  Income for the
  period            132,402     11,999      29,570
                 ==========  =========    =========
  Attributable
  to:
  Equity holders
  of the parent     104,586      6,536      25,114
                 __________  _________    _________
  Minority
  interests          27,816      5,463       4,456
                 __________  _________    _________
  Net income per
  Ordinary share
  attributed to
  Company
  shareholders
  or ADS:
  Basic                2.41       0.15        0.57
                 __________  _________    _________
  Fully diluted        1.62       0.15        0.49
                 __________  _________    _________
  Weighted
  average number
  of shares or
  ADS used for
  computation of
  income per
  share:
  Basic          43,372,819 43,372,819  43,717,058
                 __________  _________    _________
  Fully diluted  45,037,692 43,372,819  44,597,479
                 __________  _________    _________


                                     For the                  Convenience
                                   Nine months              translation(a)
                               Ended September 30,                for the
                               2008         2009        nine months ended
                                                       September 30, 2009
                             _________    _________          ____________
                                   Unaudited                    Unaudited
                             ____________________________________________
                                      NIS                    U.S. dollars
                             ____________________________________________
                             In thousands (except share
                             and per share data)

  Revenues from sales, net   5,675,797    5,534,212             1,472,648
  Cost of sales              4,105,935    3,996,225             1,063,391
                             _________    _________          ____________
  Gross profit               1,569,862    1,537,987               409,257

  Selling, general and
  administrative expenses    1,348,865    1,358,401               361,469
                             _________    _________          ____________
  Operating profit before
  changes in fair value of
  investment property and
  other gains and losses       220,997      179,586                47,788

  Other gains                   12,458        4,464                 1,188
  Other losses                   3,160       10,029                 2,669
  Changes in fair value of
  investment property, net      17,970        8,390                 2,233
                             _________    _________          ____________
  Operating profit             248,265      182,411                48,540

  Finance income                41,651       46,689                12,424
  Finance expenses            (140,214)    (138,649)              (36,894)
  Share in losses of
  associates                       (18)        (128)                  (34)
                             _________    _________          ____________
  Income before taxes on
  income                       149,684       90,323                24,036
  Taxes on income (tax
  benefit)                      35,415       10,893                 2,899
                                                             ____________
  Income for the period        114,269       79,430                21,137
                             =========    =========          ============
  Attributable to:
  Equity holders of the
  parent                        94,149       64,720                17,223
                             _________    _________          ____________
  Minority interests            20,120       14,710                 3,914
                             _________    _________          ____________
  Net income per Ordinary
  share attributed to
  Company shareholders or
  ADS:
  Basic                           2.17         1.49                  0.40
                             _________    _________          ____________
  Fully diluted                   1.85         1.49                  0.40
                             _________    _________          ____________
  Weighted average number of
  shares or ADS used for
  computation of income per
  share:
  Basic                     43,372,819   43,505,219            43,505,219
                                                             ____________
  Fully diluted             45,037,693   43,505,219            43,505,219
                             _________    _________          ____________



                                 (UNAUDITED)
                          BLUE SQUARE - ISRAEL LTD.
         CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR
       FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009
                                 (UNAUDITED)
                                                                Convenience
                                                                   transla
                                                                   tion(a)
                                                                   for the
                 Year          For the            For the        ended nine
                 ended       Nine months        Three months        months
               December ended September 30, ended September 30   September
               31, 2008      2008     2009     2008     2009      30, 2009
               ________  ________  _______  _______   ______      ________
                Audited                Unaudited                 Unaudited
               ________  ___________________________________      ________
                                     NIS                      U.S. dollars
               ___________________________________________________________
                                        In thousands
               ___________________________________________________________
  CASH FLOWS
  FROM
  OPERATING
  ACTIVITIES:
  Income
  before taxes
  on income      176,208  149,684   90,323   20,940   15,683        24,036
  Income tax
  paid, net      (94,212) (81,773) (36,610) (33,729)  (1,835)       (9,742)
  Adjustments
  required to
  reflect the
  cash flows
  from
  operating
  activities
  (a)            327,777  269,794  277,937   72,265  159,837        74,196
                ________ ________  _______  _______   ______      ________
  Net cash
  provided by
  operating
  activities     409,773  337,705  331,650   59,476  173,685        88,490
                ________ ________  _______  _______   ______      ________
  CASH FLOWS
  FROM
  INVESTING
  ACTIVITIES:
  Purchase of
  property,
  plant and
  equipment     (211,646)(163,022)(155,653) (52,227) (63,214)      (41,419)
  Purchase of
  investment
  property       (69,749) (36,380)  (8,039)     (48)  (4,732)       (2,139)
  Purchase of
  minority
  shares in
  subsidiaries  (186,403) (35,400)  (8,020) (35,400)       -        (2,134)
  Purchase of
  intangible
  assets         (30,372)  (8,618) (13,717)       -   (4,525)       (3,650)
  Proceeds
  from
  collection
  of
  short-term
  bank
  deposits,
  net            102,531  101,015     (657)      589   389,343        (175)
  Proceeds
  from sale of
  property,
  plant and
  equipment        1,559    7,249    1,965      305       428          523
  Proceeds
  from
  investment
  property         6,567        -    5,700        -         -        1,517
  Proceeds
  from sale of
  marketable
  securities     185,104  142,634   64,564   36,397     7,385       17,181
  Investment
  in
  marketable
  securities    (169,747)(131,544) (73,917) (30,904)  (19,578)     (19,669)
  Proceeds
  from sale of
  investment
  in
  subsidiary           -        -   10,074        -         -        2,681
  Interest
  received        17,778   12,261    8,464    8,019     2,135        2,252
                ________ ________  _______  _______   ______      ________
  Net cash
  provided by
  (used in)
  investing
  activities    (354,378)(111,805)(169,236) (73,269)  307,242      (45,032)
                ________ ________  _______  _______   ______      ________
  CASH FLOWS
  FROM
  FINANCING
  ACTIVITIES:
  Dividend
  paid to
  shareholders  (150,000)       -        -       -          -            -
  Issuance of
  debentures     121,259        -        -       -          -            -
  Dividend
  paid to
  minority
  shareholders
  of
  subsidiaries   (22,077) (22,077) (13,523)(10,960)    (7,342)      (3,598)
  Receipt of
  long-term
  loans          231,398  186,221  307,500 172,512    301,000       81,826
  Repayment of
  long-term
  loans         (130,571)(102,564) (98,225)(56,490)   (31,864)     (26,137)
  Repayment of
  long term
  credit from
  trade
  payables        (1,740)  (1,305)  (1,305)   (435)      (435)        (347)
  Repayment of
  convertible
  debentures            -       -  (13,297)       -   (13,269)      (3,538)
  Short-term
  credit from
  banks and
  others, net      15,689   41,603  96,214  24,958   (380,346)      25,603
  Proceeds
  from
  exercise of
  options in a
  subsidiary            -        -   2,306        -         -          614
  Interest
  paid            (89,244) (70,450)(81,049) (30,808)  (35,170)     (21,567)
                ________ ________  _______  _______   ______      ________
  Net cash
  provided by
  (used in)
  financing
  activities      (25,286)  31,428 198,621  98,777   (167,426)      52,826
                ________ ________  _______  _______   ______      ________
  INCREASE IN
  CASH AND
  CASH
  EQUIVALENTS
  AND BANK
  OVERDRAFT        30,109  257,328 361,035   84,984   313,501       96,314
  BALANCE OF
  CASH AND
  CASH
  EQUIVALENTS
  AND BANK
  OVERDRAFT AT
  BEGINNING OF
  PERIOD           53,029   56,410  83,138  228,754   130,672       22,123
                ________ ________  _______  _______   ______      ________
  BALANCE OF
  CASH AND
  CASH
  EQUIVALENTS
  AND BANK
  OVERDRAFT AT
  END OF
  PERIOD           83,138  313,738 444,173  313,738   444,173      118,437
                 ======== ======== =======  =======   ======      ========



                          BLUE SQUARE - ISRAEL LTD.
           CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
       FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009
                               (UNAUDITED)

                                                               Convenience
                                                             translation(a)
                        Year        For the        For the        for the
                        ended     Nine months    Three months   nine months
                      December      ended          ended          ended
                         31,    September 30,   September 30  September 30,
                        2008     2008     2009     2008     2009       2009
                    _________  ______   _______   ______   ______   _______
                      Audited            Unaudited                Unaudited
                    _________  __________________________________ _________
                                        NIS                    U.S. dollars
                    _______________________________________________________
                                           In thousands
                    _______________________________________________________
  (a) Adjustments
      required to
      reflect the
      cash flows
      from
      operating
      activities:
      Income and
      expenses not
      involving
      cash flows:
      Depreciation
      and
      amortization  153,882   117,804   123,814   41,744   45,048   32,947
      Increase in
      fair value
      of
      investment
      property
      net           (19,067)  (17,970)   (8,390)        -  (6,650)  (2,233)
      Share in
      losses of
      associated

      Companies,
      net                33        18       128         1      40       34
      Benefit
      component in
      grant of
      employee
      options         8,175     5,253     8,472     2,587   2,853    2,254
      Loss (gain)
      from sale
      and disposal
      of property,
      plant and
      equipment
      and
      provision
      for
      impairment
      of property,
      plant and
      equipment,
      net             5,989     (121)     3,983       104   1,787    1,060
      Loss (gain)
      from changes
      in fair
      value of
      derivative
      financial
      instruments   (19,247)   (8,278)  (24,965)    6,350  (7,013)  (6,643)
      Linkage
      differences
      on
      debentures,
      loans and
      other long
      term
      liabilities    59,669    61,198    48,189    25,941  31,832   12,823
      Capital loss
      (gain) from
      realization
      of
      investments
      in
      subsidiaries   (9,801)  (10,055)      393   (11,658)      -      105
      Accrued
      severance
      pay, net          263      (278)   (1,154)   (1,498)   (862)    (307)
      Decrease in
      value of
      marketable
      securities
      deposit and
      long-term
      receivables,
      net            11,169    13,004     7,931     9,601     868    2,111
      Interest
      paid, net      71,466    58,189    72,585    22,789  33,036   19,315

      Changes in
      operating
      assets and
      liabilities:
      Decrease
      (increase)
      in trade
      receivables
      and other
      accounts
      receivable     59,967  (309,146) (276,601) (248,613)(221,189)(73,603)
      Decreased
      (increase)
      in
      inventories   (43,136)  (57,811)  (36,985)  (20,164)     155  (9,842)
      Increase
      (decrease)
      in trade
      payables and
      other
      accounts
      payable        48,415   417,987   360,537   245,081  279,932   96,175
                    _________  ______   _______    ______   ______  _______
                    327,777   269,794   277,937    72,265  159,837   74,196
                    =========  ======   =======    ======   ======  =======


                          BLUE SQUARE - ISRAEL LTD.
           CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
       FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009
                               (UNAUDITED)
                                                               Convenience
                                                             translation(a)
                                   For the        For the        for the
                        Year     Nine months    Three months   nine months
                        ended
                      December      ended          ended          ended
                         31,    September 30,   September 30  September 30,
                        2008     2008     2009     2008     2009       2009
                     _________  _____   ______    ______   _____      _____
                      Audited            Unaudited                Unaudited
                     _________  ________________________________  _________
                                        NIS                         U.S. $
                     ______________________________________________________
                                           In thousands
                     ______________________________________________________
  (b) Supplementary
      information on
      investing and
      financing
      activities
      not involving
      cash flows:
      Conversion of
      convertible
      debentures into
      shares of
      subsidiaries      6,655   6,387      -       2,224       -         -
                     ======== ======= ======     =======  ======   =======
      Conversion of
      convertible
      debentures
      into
      shares of
      the company           -      -  12,198           -  12,198     3,113
                     ======== ======= ======     =======  ======   =======
      Purchasing
      property,
      plant and
      equipment
      on credit        14,797 10,169  10,201      10,169  10,201     2,714
                     ======== ======= ======     =======  ======   =======

                          BLUE SQUARE - ISRAEL LTD.
                           SELECTED OPERATING DATA
                  FOR THE NINE MONTH AND THREE MONTH PERIOD
                        ENDED SEPTEMBER 30, 2009
                                 (UNAUDITED)
                                                              Convenience
                                                             translation(a)
                             For the nine      For the three  for the three
                             months ended      months ended    months ended
                             September 30      September 30    September 30
                             ________________  ______________
                              2008       2009    2008    2009          2009
                               NIS        NIS     NIS     NIS         U.S.$
                             ______    ______   _____   _____       _______
                                             (Unaudited)
                             ______________________________________________

  Sales (in millions)         5,676     5,534   1,936   1,925           512

  Operating profit
  before changes in fair
  value of investment
  property and other
  gains and losses              221       180      60      59          15.7

  EBITDA (in millions)          344       312     104     107          28.4

  EBITDA margin                 6.1%      5.6%    5.4%    5.5%          N.A

  Increase (decrease) in
  same store sales              3.1%    (5.5%)    0.6%   (2.5%)         N.A

  Number of stores at
  end of period                 194       203     194     203           N.A

  Stores opened during
  the period                      9        10       4       3           N.A

  Stores closed during
  the period                      -         1       -       -           N.A

  Total square meters at
  end of period             356,300   364,300 356,300 364,300           N.A

  Square meters added
  during the period, net     12,900     9,900   5,400   2,000           N.A

  Sales per square meter     15,234    14,568   5,015   4,896         1,303

  Sales per employee (in        724       759     235     259            69
  thousands)

                          BLUE SQUARE - ISRAEL LTD.
           RECONCILIATION BETWEEN INCOME FOR THE PERIOD TO EBITDA
       FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009
                               (UNAUDITED)
                                                                   Conven
                                                                   ience
                                                                  transla
                                                                  tion(a)
                                                                  for the
                      For the        For the                        nine
                        Year       Nine months      Three months   months
                       ended         ended            ended        ended
                      December    September 30,     September 30 September
                      31, 2008    2008     2009     2008    2009 30, 2009
                     _________ _______ ________  _______  _______ ________
                                              Unaudited
                     _____________________________________________________
                                         NIS                        U.S. $
                     ____________________________________________ ________
                                             In thousands
                     _____________________________________________________
   Income for the
   period              132,402 114,269   79,430   11,999   29,569   21,137
   Taxes on income
   (tax benefit)        43,806  35,415   10,893    8,941  (13,885)   2,899
   Finance income      (60,700)(41,651) (46,689) (10,738) (18,405) (12,424)
   Finance expenses    166,295 140,214  138,649   60,874   63,138   36,894
   Other losses
   (gains)               2,483  (9,298)   5,565  (11,107)   4,927    1,481
   Change in fair
   value of investment
   property            (19,067) 17,970)  (8,390)       -   (6,650)  (2,233)
   Depreciation and
   amortization       153,882  117,804  123,814   41,744   45,048   32,947
   Benefit component
   in grant of
   employee options     8,175    5,253    8,472    2,587    2,853    2,254
                     _________ _______ ________  _______  _______ ________
   EBITDA             427,276  344,036  311,744  104,300  106,595   82,955
                     ========= ======= ========  =======  ======= ========


  Contact:
  Blue Square-Israel Ltd.
  Dror Moran, CFO
  Toll-free telephone from U.S. and Canada: [phone]
  Telephone from rest of world: [phone]
  Fax: [phone]
  Email: 

DATASOURCE: Blue Square Israel Ltd



CONTACT:  Contact: Blue Square-Israel Ltd., Dror Moran, CFO, Toll-free

telephone from U.S. and Canada: [phone], Telephone from rest of

world: [phone], Fax: [phone], Email: 

Copyright