Fox returns to the ground: profit rate of NIS 200-250 million per year – the stock is expensive

The results of the fashion company


Fox
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of Harel Wiesel return to more realistic numbers. The company records a profit of NIS 50.3 million in the third quarter of 2022, compared to NIS 87.4 million in the corresponding quarter. True, there are significant financing expenses in the current quarter of NIS 36 million (compared to NIS 17 million last year), so we can also say that the profit in the quarter is NIS 60 million, but in any case, this brings the company to a representative annual profit rate of NIS 200-250 million per year.

Fox is a good company, even very good. It has become a powerhouse: the Fox clothing brands, including Home products, Mango, Nike operations in Israel, Foot Locker and more, along with the activities of


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and


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(which were issued in the last wave of IPOs) and also the care brands like Lalin – and the stock skyrocketed in the previous two years: a return of 300% in two years and a value of NIS 8.5 billion. This year the stock has changed direction and is down by 30%, but the stock is still expensive – it trades at a price of NIS 378 and a value of NIS 5.16 billion.

The IPOs of Retailers and Terminal X were perfectly timed – before the problems came to light. For Terminal X, it is a ‘post-Corona’ injury when people bought less online and went out into the ‘real world’, for retailers it is an injury due to Nike’s decision to sell more on its own and Foot Locker’s strategic change (when last week Foot Locker also decided to exit all of its holdings in the stock, in a symbolic move that completes the separation that has occurred in the last year).

In any case, Fox is a good company, which continues to grow and weaken in the fields of consumerism in Israel. It is here to stay, only the stock’s pricing was high and now it is returning more to reality.

Fox brought in NIS 1.24 billion in the third quarter of 2022, an increase of 9.1% compared to NIS 1.14 billion in the corresponding quarter last year. However, the gross profit margin slightly eroded to 57.1% compared to 57.9% in the corresponding quarter. Sales and marketing expenses jumped by 16% to 586 million shekels (compared to 505 million last year).

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The result is a 24% drop in the operating profit which was NIS 101.8 million (profitability rate of 8.2%), compared to NIS 133.8 million (11.8%) in the corresponding quarter, and compared to NIS 143.6 million in the third quarter of 2019, (profitability of 19.3%). The aforementioned net profit fell by 42.5% and stood at NIS 50.3 million, compared to NIS 87.5 million in the corresponding quarter. The net profitability rate fell to 4.1%, compared to 7.7% in the corresponding quarter.

Harel Wiesel, CEO of Fox: “We conclude the third quarter of 2022 with record revenues and continue to implement our growth strategy in Israel and abroad. At the beginning of 2023 we will open in Israel the first store of the international chain Sunglass Hut and the first store of the Jumbo chain The Greek. Abroad, beyond the development of sports brands, in the coming days we will launch the first American Eagle store in Europe and in early 2023 we will open Fox Home and Mango stores in Canada.”

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