In the quarter, the fashion company recorded a 77% drop in net profit to only NIS 5 million; Sales in identity stores in the clothing sector decreased by 4% – the sector shifted to a quarterly operating loss of NIS 8 million
The increase in sales in the accessories sector and the cosmetics sector did not help Castro to successfully conclude the quarter since the main sector in which it operates, the fashion sector, recorded a sharp decrease in sales.
The revenues of the group, which is managed by Ron Rotter, amounted to NIS 430 million – the top line amount was contributed by a 10% growth in same-store sales in the accessories sector, which yielded the group revenues of NIS 132 million; Sales in identity stores in the field of cosmetics increased by 17% and contributed NIS 11 million to revenues – the sector moved in the current quarter to an operating profit of NIS 600 thousand.
In the clothing sector, on the other hand, sales in identity stores decreased by 4% and the activity shifted to an operating loss of NIS 8 million, compared to an operating profit of NIS 21 million in the corresponding quarter last year.
The sales per square meter in all of the group’s identical stores remained the same as the corresponding quarter and stood at NIS 1,604; the group’s gross profit decreased by 1% to NIS 250.5 million due to the increase in the dollar exchange rate against the shekel, the deepening of the average discount rate and the increase in shipping costs. The gross profit rate decreased by 1.32% to 58.3%.
Castro’s sales and marketing expenses increased by more than 8% to NIS 203 million, due to the increase in rent expenses which already constitute 13% of Castro’s sales turnover, compared to 11% in the corresponding quarter last year. Labor wages also jumped to 18% of the sales turnover compared to 16% in the corresponding quarter.
According to her, the increase in expenses (mainly rent and labor in relation to turnover) suffered by Castro is mainly due to inflation, which increased the rental payments and management fees paid by the group to the malls by approximately NIS 3 million. This at a time when its sales did not grow significantly. Calculated from the beginning of the year, the effect of inflation on the group’s rent was NIS 7 million.
A strong increase was also recorded in administrative and general expenses – these expenses jumped by 29% and amounted to NIS 29 million. During the quarter, the company recognized an expense of NIS 600,000 due to the cancellation of the issuance of the subsidiary Urbanika. The operating profit of the group in the summary of the third quarter fell by 58% and was NIS 18 million. The operating profitability rate dropped to 4%, compared to 10% in the third quarter of last year.
Castro continues to implement the strategic plan to expand its brand chains but warns that its predictions may not come true “if there is a significant change in the economic situation in Israel and in the world”. The company is going to open seven more stores for the Urbanika brand, transfer the online activity to a dedicated MRL, continue to move the Carolina Lemka stands to stores and open 10 stores for the brand in 2023.
Castro also plans to open six stores in the new concept for Hudis, as well as five stores for the Italian makeup brand Kiko Milano, two stores for the cosmetics brand Yves Rocher in a new concept of open stores that Castro is exploring for the French brand, and five stores in a brand new concept that will emphasize gold and silver jewelry in the Top Ten chain. In addition, the group continues to work to increase the number of members in the customer club, which is approximately one million members.