Blue Square - Israel Ltd. Reports Financial Results for the Third Quarter and Fi

Further to its announcement dated August 13, 2007, during the thirdquarter the Company launched its "Mega In Town" format designed to bringdiscount shopping to neighborhoods. The initiative included the conversion of104 existing SuperCenter and Mega stores to the new brand, together with amajor media campaign. As a result, the Company recognized growth in sales in"Mega In Town" stores, along with an increase in SG&A Expenses associatedwith the launch.

Results for the Third Quarter

Revenues: Revenues for the third quarter of 2007 increased by 6.6% to NIS1,823.5 million (U.S. $454.4 million)(a) compared with NIS 1,710.2 million inthe third quarter of 2006. The increase reflects additional selling spaceresulting from the opening of eight new stores during the previous year, andthe ongoing expansion of operations of Bee Group Retail (formerly KfarHa'Shaashuim), including the consolidation of initial revenues of VardinonTextile Ltd. (TASE: WRDT) ("Vardinon"), 85.8% of which the Company acquiredin Q2.

Gross Profit: Gross profit for the third quarter of 2007 increased by7.5% to NIS 480.2 million (U.S. $119.7 million) compared to NIS 446.5 millionin the third quarter of 2006. This reflects improved agreements withsuppliers and higher profitability onsales generated by the Company'ssubsidiary Bee Group Retail, moderated by a strongly competitive environmentand the impact from the launch of the Mega In Town chain which increased theproportion of discount sales in the revenue mix. Gross margin for the periodincreased to 26.3% from 26.1% in the third quarter of 2006.

Selling, General, and Administrative Expenses: The Company's Selling,General, and Administrative expenses for the third quarter of 2007 increasedby 13.3% to NIS 411.6 million (U.S. $102.6 million) compared to NIS 363.3million in the third quarter of 2006. The increase reflects activitiesassociated with the successful launch of the Mega In Town chain, includingrenovations, advertising, marketing and other expenses, as well as theopening of eight new stores in the prior year.

Operating Income: Operating income for the third quarter of 2007 was NIS68.6 million (U.S. $17.1 million) compared to NIS 83.2 million in the thirdquarter of 2006. The decrease reflects the quarter's significant Selling,General and Administrative expenses. As a result, operating margin for theperiod decreased to 3.8% from 4.9% in the third quarter of 2006.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization):EBITDA for the third quarter of 2007 was NIS 101 million (U.S. $25.2million), a decrease of 12.8% compared with NIS 116 million in the thirdquarter of 2006. EBITDA margin for the period was 5.5% compared with 6.8% inthe third quarter of 2006.

Financial Expenses: Financial expenses for the third quarter of 2007 wereNIS 26.2 million (U.S. $6.5 million) compared to NIS 12.2 million in thethird quarter of 2006. The increase derives primarily from the quarter's 2.5%increase in the "known" price index to which most of the Company's loans anddebentures are linked, compared to the parallel quarter of 2006, in which theprice index increased by 0.2%.

Other Income: Other expenses for the third quarter of 2007 were NIS 2.4million (U.S. $0.6 million), related to disposal of assets. In the thirdquarter of 2006, the Company recorded other income of NIS 48.5 million, whichderived primarily from the IPO of its subsidiary, Blue Square Real EstateLtd. ("BSRE").

Taxes On Income: Taxes on income for the third quarter of 2007 were NIS4.6 million (U.S. $1.1 million) compared to NIS 22.4 million in the thirdquarter of 2006. The tax rate for the quarter was 11.4%, due to a release ofa tax provision with regard to the deductibility of finance expenses inconnection with loans taken by the Company for dividend distributions. TheCompany released this tax provision based on recent verdicts by Israel'sSupreme Court and the opinion of the Company's legal counsel. In the thirdquarter of 2006, the Company's tax rate was 18.8%, due to capital gainsassociated with the IPO of its subsidiary, BSRE, which were not taken intoaccount in computing tax expenses.

Net Income: The Company's net income for the third quarter of 2007 wasNIS 28.6 million (U.S. $7.1 million), or NIS 0.66 per ADS (U.S.$ 0.16) (NIS0.66 per fully diluted ADS). Net income for the third quarter of 2006,including capital gains associated with the Company's subsidiary, BSRE, wasNIS 89.1 million, or NIS 2.27 per ADS (NIS 2.03 per fully diluted ADS). Netincome for the third quarter of 2006, excluding capital gains, was NIS 40.5million.

Other Operating Data:

- The Company's Same Store Sales for the third quarter of 2007 increasedby 0.8%.

- During the third quarter of 2007, the Company opened 2 stores, adding anet total of 5,650 square meters to the chain.

Results for the Nine Months

Revenues: Revenues for the first nine months of 2007 increased by 5.5% toNIS 5,197.8 million (U.S. $1,295.3 million) compared to NIS 4,924.6 millionin the first nine months of 2006. The growth in sales reflects the factorsdiscussed above, including an increase in selling space, the contribution ofBee Group Retail operations and consolidation of Vardinan's revenues for thefirst time.

Gross Profit: Gross profit for the first nine months of 2007 increased by7.9% to NIS 1,375.0 million (U.S. $342.6 million) compared to NIS 1,273.9million in the first nine months of 2006. Gross margin for the periodincreased to 26.5% from 25.9% in the first nine months of 2006, reflectingthe factors described above, including improved agreements with suppliers andhigher profitability of Bee Group Retail sales, mitigated by greatercompetition and an increase in the proportion of discount sales following thelaunch of the Mega In Town chain.

Selling, General, and Administrative Expenses: Selling, General, andAdministrative expenses for the first nine months of 2007 increased by 10.8%to NIS 1,151.7 million (U.S. $287.0 million) (22.2% of revenues) compared toNIS 1,039.8 million (21.1% of revenues) in the first nine months of 2006,reflecting the factors described above, including, activities associated withthe launch of the Mega In Town chain, the opening of eight new stores in theprior year and an increase in employee wages.

Operating Income: Operating income for the first nine months of 2007 wasNIS 223.3 million (U.S. $55.7 million) compared to NIS 234.0 million in thefirst nine months of 2006, reflecting the period's increased operatingexpenses, mitigated by higher revenues and gross profit. Operating margin forthe period was 4.3% compared to 4.8% in the first nine months of 2006.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization):EBITDA for the first nine months of 2007 was NIS 321 million (U.S. $80million) compared with NIS 332 million in the first nine months of 2006.EBITDA margin for the period was 6.2% compared with 6.7% in the first ninemonths of 2006.

Financial Expenses: Financial expenses for the first nine months of 2007were NIS 44.8 million (U.S. $11.2 million) compared to NIS 44.7 million inthe first nine months of 2006. The increase derived primarily from a rise inthe "known" price index mitigated by reduction in interest expenses due tofewer loans from banks and debentures.

Other Income: In the first nine months of 2007, the Company recordedother expenses of NIS 2.4 million (U.S. $0.6 million). In the first ninemonths of 2006 the Company recorded other income of NIS 47.9 million,consisting primarily of capital gains associated with the IPO of BSRE.

Taxes on Income: Taxes on income for the first nine months of 2007 wereNIS 45.8 million (U.S. $11.4 million), compared to NIS 60.8 million in thefirst nine months of 2006. The tax rate for the period was 26.1% compared to25.6% for the first nine months of 2006, reflecting the factors discussedabove.

Net Income: Net income for the first nine months of 2007 was NIS 108.3million (U.S. $27.0 million), or NIS 2.58 per ADS (U.S. $0.64) (NIS 2.5 perfully diluted ADS) compared to NIS 157.1 million, or NIS 4.02 per ADS (NIS3.66 per fully diluted ADS), for the first nine months of 2006.

Other Operating Data

- The Company's Same Store Sales for the first nine months of 2007 wereunchanged from those of the comparison period.

- During the first nine months of 2007, the Company opened seven stores,adding a net total of 15,980 square meters to the chain.

    Dividend    On April 12, 2007, the Company paid a dividend of NIS 60 million.    On October 8, 2007, the Company paid a dividend of NIS 220 million.    Strategic Progress

- Mega In Town: On August 13, 2007, the Company launched its "Mega InTown" format designed to bring discount shopping to the neighborhood. Theinitiative included the conversion of 104 of its existing SuperCenter andMega stores to the new brand, together with a major media campaign.

- Expansion into the Non-Food Sector: Subsequent to the end of thequarter, the Company's subsidiary, Bee Group Retail Ltd., acquired control ofNaaman Porcelain Ltd., one of Israel's major branded houseware retailers(TASE: NAMN). As a result, Bee Group Retail Ltd. now operates (partiallythrough franchisees) 234 retail outlets, with activities in the toy,houseware, gift, baby and textile sectors.

- Organic/Health Food: After the quarter, the Company completed theacquisition of 51% of Eden Briut Teva Market Ltd., one of Israel's largestretailers of organic, natural and health food products.

Comments of Management

Commenting on the results, Mr. Zeev Kalimi, Blue Square's President andCEO since October 1, 2007, said, "The third quarter was a period of continuedsales growth and strategic progress for Blue Square Israel. The launch of ournew Mega In Town supermarket is a major milestone for the Company that webelieve is changing the map of Israeli retail. Although expenses associatedwith the launch impacted our profitability during the third quarter, Mega InTown is progressing well according to our plans and projections and wecontinue to fine-tune its operating strategies."

Mr. Kalimi continued, "Our acquisition of Naaman Porcelain (TASE: NAMN)is another step in our expansion into the Non-Food sector, which continueswith full force. In parallel, our acquisition of a controlling share of Eden,a pioneering leader of Israel's emerging health food sector, establishes usas one of the leaders of this new, high-potential market. By expanding therange of our retail activities, we will better leverage our know-how andbrand assets in order to create additional value for our shareholders. I amproud to lead the excellent Blue Square team and excited regarding our futureprospects."

Blue Square announces change in Directors:

Blue Square announced today that Mr. Shaul Gliksberg resigned from hisposition as a director of Blue Square's Board. Mr. Gliksberg served as aboard member since November 2005. Blue Square expressed its appreciation andthanks to Mr. Gliksberg for his contribution to the Company.

The Board of Directors appointed Mr. Ron Fainaro as a director, as oftoday's date. Mr. Fainaro is Chief Financial Officer of Africa Israel Ltd.,as well as a director of various Africa Israel subsidiaries. He previouslyserved as Executive Vice President and CFO of Ectel Ltd. from 2005 to 2007.Prior thereto, he served as CFO and VP Finance of Tecnomatix TechnologiesLtd. (WW Electronics and Shopfloor Divisions and the America Operation) from2004 to 2005, and as CFO and VP Finance of Tecnomatix Unicam Inc. from 2001to 2003. Mr. Fainaro is a CPA and holds a BA degree in Accounting from TelAviv University and B.Sc. degrees in Physics and Materials Engineering.

IFRS - International Financial Reporting Standard

In July 2006, the Israel Accounting Standards Board published AccountingStandard No. 29, "Adoption of International Financial Reporting Standards("IFRS")" (hereinafter: "the Standard"). The Standard states that companiessubject to the Securities Law - 1968 and reporting under it are to preparetheir financial statements for the reporting periods commencing January 1,2008 according to the International Financial Reporting Standards (IFRS). Theopening balance sheet according to IFRS will be as of January 1, 2007 (thedate of the Company's transition to IFRS). The initial implementation of IFRSwill be effected along with the implementation of IFRS 1, "First TimeAdoption of International Financial Reporting Standards", for the purposes ofthe transition. In the financial statements prepared according to the IFRSregulations in the first year of adoption, the Company is obliged to showcomparative figures for only one year.

The Company is preparing for the adoption of the IFRS standards and hasexamined the substantive implications for the Company as a result of theadoption of these standards.

An assessment of the likely quantitative effects of the transition toreporting under IFRS was provided by the Company in its press release for thesix month period ended June 30, 2007.

The assessment process is expected to be completed prior to thesubmission of financial statements for the period ending December 31, 2007.Also included will be a comprehensive quantitative clarification audited bythe auditing accountant regarding the effects of said transition.

NOTE A: Convenience Translation to Dollars

The convenience translation of New Israeli Shekel (NIS) into U.S. dollarswas made at the rate of exchange prevailing at September 30, 2007: U.S. $1.00equals NIS 4.013. The translation was made solely for the convenience of thereader.

Blue Square is a leading retailer in Israel. A pioneer of modern foodretailing in the region, Blue Square currently operates 182 supermarketsunder different formats, each offering varying levels of service and pricing.

This press release may contain forward-looking statements, within themeaning of the Private Securities Litigation Reform Act of 1995, with respectto the Company's business, financial condition, prospects and operatingresults. These statements are based on current expectations and projectionsthat involve a number of risks and uncertainties. Actual results could differmaterially from those anticipated in these forward-looking statements as aresult of various factors, including risk of market acceptance, the effect ofeconomic conditions, the impact of competitive pricing, supply constraints,the effect of the Company's accounting policies, as well as certain otherrisks and uncertainties which are detailed in the Company's Annual Report onForm 20-F and other filings with the Security and Exchange Commission.Forward-looking statements speak only as of the date on which they are madeand the Company undertakes no commitment to revise or update anyforward-looking statement in order to reflect events or circumstances afterthe date any such statement is made.

                            BLUE SQUARE - ISRAEL LTD.                      CONDENSED CONSOLIDATED BALANCE SHEET                            AS OF SEPTEMBER 30, 2007                                                               Convenience                                                               translation                                                               Convenience                                                              translation(a)                                  December 31, September 30,   September 30,                                               ____________                                     2006     2006    2007         2007                                  ___________ _____   _____    ____________                                  (Audited)    (Unaudited)      (Unaudited)                                  ___________ _____________    ____________                                         NIS                  U.S. dollars                                  _________________________________________                                          In thousands                                  _________________________________________            A s s e t s    CURRENT ASSETS:    Cash and cash equivalents   186,454      243,429   459,248   114,440    Marketable securities        65,287            -   146,161    36,422    Short-term bank deposit     526,459      519,654   201,502    50,212    Trade receivables           672,605  *   747,324   795,535   198,239    Other accounts receivable   119,028  *   295,411   242,750    60,492    Inventories                 392,583      403,536   453,832   113,090                              _________    _________ _________   _______    Total current assets      1,962,416    2,209,354 2,299,028   572,895                              _________    _________ _________   _______    INVESTMENTS AND LONG TERM    RECEIVABLES:    Investments in associated    companies                      4,762        4,189     4,899     1,221    Other long term receivables    2,618        3,208     2,373       591                                   _____        _____     _____     _____                                   7,380        7,397     7,272     1,812                                   _____        _____     _____     _____    FIXED ASSETS, NET OF    ACCUMULATED DEPRECIATION *            *    AND AMORTIZATION         *  1,763,733 * 1,725,070 1,787,777   445,496                                _________   _________ _________   _______                             *            *    INVESTMENT PROPERTY***   *    222,057 *   217,124   302,487    75,377                                _________    ________ _________   _______    DEFERRED TAXES                 16,789      21,315    20,098     5,008                                _________    ________ _________   _______    INTANGIBLE ASSETS AND     *           *    DEFERRED CHARGES, NET     *    99,358 *    98,786   119,915    29,882                                __________   ________ _________   _______                                4,071,733   4,279,046 4,536,577 1,130,470                                __________  _________ _________ _________    * Reclassified.

** Reclassification in respect of retrospective application of change inaccounting policy

*** As of September 30, 2007, presented based on the fair value model andas of September 30, 2006 and December 31, 2006 presented at cost.

                            BLUE SQUARE - ISRAEL LTD.                      CONDENSED CONSOLIDATED BALANCE SHEET                            AS OF SEPTEMBER 30, 2007                                                                 Convenience                                                               translation(a)                            December 31,    September 30,       September 30,                                          _______________                               2006       2006      2007            2007                             _________    _____     _____                             (Audited)      (Unaudited)          (Unaudited)                             _________    _______________       _____________                                       NIS                      U.S. dollars                             ________________________________________________                                           In thousands                             ________________________________________________     Liabilities and     shareholders' equity     CURRENT LIABILITIES:     Credit and loans     from banks             211,152       247,267    131,458         32,758     Current maturities     of debentures           53,706        55,336     69,841         17,404     Trade payables      *  938,007     1,057,858  1,120,460        279,208     Other accounts     payable and accrued     expenses               409,153       511,095    538,514        134,192     Dividend payable             -             -    260,000         64,789     Total current                          _________     _________  _________       ________     liabilities          1,612,018     1,871,556  2,120,273        528,351                          _________     _________  _________       ________     LONG-TERM     LIABILITIES:     Long-term loans from     banks and other     liabilities,     net of current     maturities           *  119,574       129,132   212,519         52,958     Debentures, net of     current maturities      827,558       830,564   772,146        192,411     Convertible     debentures, net of     current     maturities              214,794       218,226   143,350         35,721     Deferred income     taxes                    30,198        27,787    39,492          9,841     Liability for     employee rights, net     of amount     funded                   35,527        37,168    38,835          9,677     Total long-term                           _________     _________  _________       _______     liabilities           1,227,651     1,242,877  1,206,342       300,608                           _________     _________  _________       _______     MINORITY INTEREST       239,142       230,589    227,087        56,588                           _________     _________  _________       _______     SHAREHOLDERS'     EQUITY:     Share capital -     ordinary shares of     NIS 1 par value          53,414        53,347    57,094         14,227     Additional paid-in     capital                 737,756       735,763   845,173        210,609     Retained earnings:     Dividend declared     subsequent to     balance sheet     date                     60,000             -         -              -     Unappropriated          141,752       144,914    80,608         20,087                             _______       _______   _______        _______                             992,922       934,024   982,875        244,923     Total shareholders'     equity                4,071,733     4,279,046 4,536,577      1,130,470                           _________     _________ _________      _________    * Reclassified.                            BLUE SQUARE - ISRAEL LTD.                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS          FOR THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2007                                                               Convenience                                                              translation(a)                                                                 for the                                                               three months              Year    Nine months ended    Three months ended     ended              ended     September 30,         September 30,     September 30,                      _________________    __________________             December   2006       2007      2006      2007         2007               31      ________  _______    ________  ________   __________               2006            (Audited)               (Unaudited)                 (Unaudited)           __________ _______________________________________  _____________                              NIS                              U.S. dollars                                                               _____________                In thousands (except share and per share data)           _________________________________________________________________    Sales    6,515,035  4,924,630  5,197,837  1,710,242  1,823,522    454,404    Cost of    sales    4,812,952  3,650,770  3,822,798  1,263,716  1,343,356    334,751            __________  _________  _________  _________  _________    _______    Gross    profit   1,702,083  1,273,860  1,375,039    446,526    480,166    119,653    Selling,    general and    administrative    expenses 1,396,877  1,039,837  1,151,714    363,304    411,575    102,560             _________  _________  _________    _________ _________  ________    Operating    income     305,206    234,023    223,325     83,222     68,591     17,093    Financial    expenses,    net         42,368     44,720     44,795     12,189     26,238      6,538             _________  _________  _________    _________ _________ _________               262,838    189,303    178,530     71,033     42,353     10,555    Other    income    (expenses),    net         78,022     47,917     (2,415)    48,535     (2,352)     (586)             _________  _________  _________    _________ _________ _________    Income before    taxes on    income     340,860    237,220    176,115    119,568     40,001      9,969    Taxes on    income      96,660     60,799     45,886     22,424      4,552      1,134              _________  _________  _________    _________ _________ _________    Income after    taxes on    income     244,200    176,421    130,229     97,144     35,449      8,835    Share in    profits    (losses) of    associated    companies,    net          1,284        712        137        229       (262)      (65)    Minority    interest in    profits of    subsidiaries,    net         31,573     20,060     22,108      8,281      6,579      1,640              _________  _________  _________    _________ _________ ________    Net income    for the    period     213,911    157,073    108,258     89,092     28,608      7,130              _________  _________  _________    _________ _________ ________    Net income     per    Ordinary    share    or ADS:    Basic         5.46       4.02       2.58       2.27       0.66       0.16              _________  _________  _________    _________ _________ ________    Fully   diluted        4.92       3.66       2.47       2.03       0.66       0.16              _________  _________  _________    _________ _________ ________    Weighted    average number    of shares or    ADS used for    computation of    income per    share:    Basic  39,207,214 39,044,588 42,012,451 39,232,544  43,362,460 43,362,460            __________ __________ __________ __________  __________ _________    Fully   diluted 44,939,831 44,939,784 45,247,831 44,939,784  44,988,066 44,988,066            __________ __________ __________ __________  __________ _________                            BLUE SQUARE - ISRAEL LTD.                             SELECTED OPERATING DATA                                                                Convenience                                                               translation(a)                               For the nine      For the three for the three                               months ended      months ended   months ended                               September 30      September 30   September 30                               ____________      ____________   ____________                               2006    2007      2006    2007        2007                               NIS      NIS      NIS      NIS       U.S.$                               ____    ____      ____    ____    ___________                                        (Unaudited)              (Unaudited)                               _____________________________________________    Sales (in millions)      4,925    5,198      1,710   1,824           454    Operating income (in    millions)                  234      223         83      69            17    EBITDA (in millions)       332      321        116     101            25    EBITDA margin              6.7%     6.2%      6.8%     5.5%           NA    Increase in same store    sales*                     5.7%     0.0%      2.7%    0.8%            NA    Number of stores at end    of period                  174      182      174      182             NA    Stores opened during    the period                   6        7        3        2             NA    Stores closed during    the period                   -        -        -        -             NA    Total square meters at    end of period          322,165  339,280  322,165  339,280             NA    Square meters added    during the period,    net                     10,094   15,980    3,833    5,650             NA    Sales per square meter  14,969   14,929    5,094    5,112          1,274    Sales per employee    (in thousands)             712      711      234      236            59    * Compared with the same period in the prior fiscal year.    Contact:    Blue Square-Israel Ltd.    Dror Moran, CFO    Toll-free telephone from U.S. and Canada: 888-572-4698    Telephone from rest of world: +972-3-928-2220    Fax: +972-3-928-2299    Email: