Fox Group CEO Harel Weizel Highlights Growth Challenges Despite Strong Q2 Results

Fox Group, led by CEO Harel Weizel, reported second-quarter revenues of 1.8 billion shekels and a net profit of 123 million shekels. During an investor call, Weizel candidly acknowledged that two major growth engines, Retailers (impacted by Nike's weak performance) and Jumbo Greece, have yet to reach their full potential. Despite these challenges, other core segments, including fashion and home fashion brands like Fox, Fox Home, Mango, and American Eagle, grew by approximately 15% to 570 million shekels in revenue. The "Others" segment, encompassing brands such as Shilav and Flying Tiger, doubled its operating profit with sales reaching around 433 million shekels.

Weizel elaborated on the complexities of expanding Jumbo, noting the difficulty of opening large stores compared to smaller retail outlets. He expressed confidence in Jumbo's business model and ongoing improvements, including shortening the supply chain to reduce costs by shipping directly from China to Israel instead of routing through Greece. The cautious dividend payout of 150 million shekels, despite a cash reserve exceeding one billion shekels, was attributed to Israel's current security uncertainties. Weizel emphasized a prudent approach, preferring to maintain liquidity amid unpredictable conditions.

The company recently completed a bond issuance with demand six times the amount offered, ultimately raising 555 million shekels. Weizel highlighted consistent cash flow generation of nearly one billion shekels annually over the past three years. He also addressed challenges in the Retailers segment, where sales declined due to Nike's global struggles, and stated the company will not aggressively expand store openings until market conditions improve.

Terminal X, Fox Group's e-commerce arm, showed strong growth with a 20.5% increase in sales to 161 million shekels and a 59% rise in operating profit. The company is shifting from a multi-brand platform to acquiring and expanding smaller brands, such as the modest fashion brand Sade Bar, with plans for further acquisitions in wellness, vitamins, home, and cosmetics sectors. Weizel stressed that internet growth is balanced with profitability, contrasting with many global e-commerce firms.

Despite the cautious outlook, Weizel noted no significant slowdown in Israeli consumer behavior so far and expressed optimism about resuming international brand negotiations if security stabilizes. He reaffirmed Fox Group's commitment to transparency and long-term growth, rejecting ideas to delist or restructure Retailers amid share price declines.