Retailers was issued at a bargain price in May and has soared by 54% since

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Fashion chain and sports accessories


Retailers
+9.34%





Base:8,551

opening:8,551

Tall:9,390

low:8,501

change:18,695,312

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Fox
+6.16%




Fox


Base:51,320

opening:52,000

Tall:54,480

low:49,510

change:16,922,059

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Climbed about 2% in Tel Aviv yesterday after publishing its results for the third quarter towards the end of the trading day. Today, after publishing a presentation to investors in English and conversations with the market, the stock has already jumped by 8% and now reflects a company value of NIS 4.1 billion. Retailers raised NIS 570 million at a value of NIS 2.5 billion after the money in May, and since its inception trading has risen by 54%. Among the big earners: Bank Leumi.

Leumi Partners, the bank’s real investment arm under Avi Ortal’s, bought a 10% stake in the company for NIS 66 million. In a put offer in the offering, it met with the cash when it sold this holding for NIS 90 million (profit of NIS 24 million, a return of 36% on the amount invested) – and was left with blocked shares for 18 months at a rate of 6.8% of the company’s capital. This part is worth about NIS 280 million today.

The jump today in the company’s stock was made after the Retailers linked the good results of the third quarter. This is the place to go back and mention that in 2020 sales stood at NIS 640 million, and the value of the offering was multiplied by 2.9 on this figure. Prior to the IPO, the company marketed to its investors its plans to expand the deployment of Nike franchises in Israel and abroad, as well as those of Pot Locker, as well as the expansion of the new Dream Sports chain in Israel.

Even then, there was talk of a target of 200 branches for the various activities, in all areas of activity, at the end of 2022, compared to 112 branches at the beginning of the year. In the eyes of the time, the offering seemed relatively expensive. Since we were in a boiling IPO market – at one point they stopped believing in companies. After all, everyone will tell investors that they are growing and Otto will be perfect. How do you know in advance which company will really grow as promised?

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But now it can be seen that in the third quarter the company earned NIS 32 million, ie a rate of NIS 128 million a year, a profit multiplier of 20. Today it can be said that meanwhile businesses are progressing according to plan, meaning the risk is smaller than expected. So do it at a bargain price – albeit the wisdom of retrospect, but still something worth mentioning and attributing to the credit of retailers as well.

Interim targets are also being met – prior to the IPO, the company talked about an addition of 29 branches by the end of 2020, ie 141 in total. Meanwhile, at the end of the third quarter it stands at 132 (a year earlier: 96) – 50 for Nike (50% of revenue in the first nine months), 74 for Pot Locker (42%) and 8 for Dream Sports (8%).

Revenues in the first nine months amounted to NIS 773 million, a growth of 65.5% over the levels of a year earlier. In the third quarter alone, the company’s revenues increased by 61% to NIS 341.6 million. The company also grew through an increase in sales with the expansion of branches in existing areas and those in new areas (during the reporting period it entered Norway and Sweden and with Nike began operations in Hungary, the Czech Republic and Slovakia – an activity bought by another franchisee), and through increased sales of identical branches (36.4% in the third quarter). . Growth upon growth, if you will.

The goals are good for the paper, but how much does the fulfillment of the business plan so far attest to the continuation and realization of the same goal of 200 branches? Are you really able to find good locations, and do so in time to sign leases? Sources involved in the company’s business with whom we spoke at BizPortal talk about the strategic plan being detailed to such a level that Retailers know well in advance each existing mall or in the planning and construction in the areas they aspire to enter, at the level of customer movement and at what escalators they move more Familiarize yourself with the reality of racing after deals and placements.

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As mentioned, the nature of the activity is franchising (with the exception of Dream Sports), both of Nike and of the global Pot Locker. The two on the face of it can say, a reflection of retailers seeking to operate in a new country, that the risk-chance equation justifies the global network going into it alone, rather than sharing revenue in a franchise or joint venture model. But in the meantime, things are looking positive, as retailers have franchise agreements for 7 years to a decade in 15 different countries.

And by the way global networks, Pot Locker for example fell on the last trading day last week on Wall Street by 11% after having surpassed analysts’ forecasts but reported a hurt in gross profitability due to supply chain disruptions. The CFO said there was enough stock to meet demand for the holiday season. Investors feared for the latter, and lowered the stock.

Retailers seem to be less concerned about this, as they rely on a different model, and the company environment does not report such disruptions as harming them. As a franchisee in the Nike and Potlocker chain (“Multi Brand”, which sells various sports brands, such as Nike, Adidas, New Balance and more – unlike the Nike chain under the “Mono Brand” category), Retailers does not itself import. This is already a problem for Nike, Adidas & Co. representatives in Israel (as opposed to franchises) – so the economic model is different.

The company’s working assumption is that existing stores will continue to grow all the time, and so will these new ones show consistent growth – meaning we will not see scenarios of an onslaught and then a shuffle, so at least Retailers will hope. As for the near future it can be said that there is seasonality in the industry due to the Christian holidays in the fourth quarter, so it is possible that this will be reflected in the results of retailers.

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The expansion described is solid in some parts of it. For example, despite the rise of e-commerce, Retailers are in no hurry to open online sites for local activities – even though their contracts allow them to do so within 12 months of entering any new territory. The strategy is not to do this already when possible, but first to establish the business sufficiently.

The acquisition of the Energy fitness equipment chain, which is active in the private and private institutional sectors (gyms), and the contacts for the acquisition of the franchise for the Converse shoe brand in Israel (“Allstar”) will also be noted. Retailers is also benefiting from a move by global chains that actually hurts Israeli consumers.

Thus, Nike and Adidas in Israel have cut dozens of independent retailers to whom they will stop selling, in order to attract more buyers to Nike and Adidas’ dedicated stores – where they can also have more control over the price to the consumer. Some suppliers would receive goods in parallel imports, and even in this the global chains tried to fight, as well as cheaper selling prices of some of the small businesses, which according to the brand method harmed their prestige.

In this sense, retailers, as a franchisee, are on the good side of the equation – but people close to the company say that it would also like to buy and sell more than Nike and Adidas, as well as enjoy more flexibility about where to sell (eg Nike – whether only at Nike branches or Pot Locker). These requests, for their part, are likely to be coordinated if demand on the ground, and if global networks refuse to meet them in order to maintain “rarity” at some level of commodity, then potential growth, at one level or another, is hurt.

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