Three of Israel's largest fashion groups have vacated stores in the TLV Gindi shopping mall in Tel Aviv. Sources inform "Globes" that the Hoodies group, which opened its store in the mall six months ago; Golf & Co. (TASE:GOLF), which had an Intima brand store there; and Fox-Wizel Ltd. (TASE: FOX), which has a branch of The Children's Place chain; are all vacating stores in the mall. The financial reports for the mall published late last week show that it has lost NIS 70 million so far this year.
Discount chain for travelers instead of fashion
The Gindi TLV fashion mall opened less than two years ago with outlets from Israel's most prestigious fashion chain and tried to create an image of a desirable location. It has lost ground and been forced to adjust to the unfavorable situation. Sources inform "Globes" that the Fox chain is making its move first away from the mall by closing an outlet there of The Children's Place, its US chain of children's and babies' fashions. A stroll through the mall shows more and more unoccupied stores. The store vacated by Fox, located near an Adidas store, is now occupied by Soldier-Traveler, a discount chain selling equipment in these two categories.
The Children's Place, which began its activity in Israel in 2014 by granting Fox an exclusive franchise for the brand, now operates 43 stores in Israel.
This is the first time that Fox has moved a branch away from the TLV mall, where it now has 10 stores. The reason is probably dissatisfaction with activity at the outlet. The measure runs against the Fox group's policy of expanding its activity.
Soldier-Traveler has hitherto operated mostly in open-air shopping centers and less successful malls in places such as Afula, Mevasseret Zion, Netanya, Rehovot, Beer Sheva, Rosh Pina, and Eilat. The chain also had a branch that closed down in commercial space in Ramat Aviv outside the Melisron Ltd. (TASE: MLSR) mall.
Together with Fox, Golf also vacated its store in the TLV Gindi mall last month. As of now, the store, which was located in a prominent place at the entrance to the mall next to a Castro branch, is still empty. Hoodies, which is now part of Castro, also left TLV Gindi several months ago.
Golf said that its Intima store in the TLV mall had been a temporary pop-up store that left the location.
Heavy losses and plunging rents
TLV Gindi is held by the City Mall Tel Aviv company, owned by Blue Square Real Estate Ltd. (TASE:BLSR) (50%), Gindi Investments (25%), and Moshe and Yigal Gindi (25%). At the launching event for the mall almost two years ago, then-CEO Mordi Shabat said, "We have brought Ramat Aviv Gimmel to central Tel Aviv."
The TLV Gindi mall's failure is no secret, and several changes have been made in it. It has lost money since it was founded, and large write-downs have been made for it. Its value sank by NIS 80 million to NIS 1.68 billion in the second quarter of 2018. The company said that the mall's value had not changed in the third quarter, but the mall finished the first three quarters of 2018 with a NIS 70 million loss, including NIS 5 million in the third quarter.
Rents in the mall are also at an all-time low of NIS 306 per square meter, and the trend is continuing. Rents in new leases signed are 4.5% less than the average rent in the preceding year. There are, however, also some positive signs: City Mall Tel Aviv's revenue grew 23% to nearly NIS 27 million in the third quarter.
Despite the mall's improved gross profit, its cash flow from current activity is still negative, with large financing expenses constituting a substantial burden for it.
The Fox group said in response, "The Children's Place chain has been expanding in recent years, with eight new stores opened just in the past year. We are considering the activity in the stores' activity separately for each brand on its own merits. The Fox group believes in the TLV Gindi mall, which has outlets from many of the group's chains, such as Fox, Fox Home, American Eagle, Mango, Laline, Billabong, Foot Locker, Nike, Yanga, and Sack's. Urban Outfitter's Anthropologie brand will open its first store in Israel in the mall."
The TLV mall said in response, "As part of the mall's strategy of diversifying and changing its composition of stores, we chose to bring in a new Traveler-Soldier store with accessible prices. A tier-1 clothing chain will enter the mall in the future in place of the store that was next to Castro (where an Intima store was located)."
Published by Globes, Israel business news - en.globes.co.il - on December 6, 2018
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