Golf's Q1 results reflect Israeli fashion industry's woes

Golf & Co

Golf CEO Raviv Brookmayer: I have no doubt that the quarter is not representative.

Fashion company Golf & Co. (TASE:GOLF) has again disappointed its investors, against the background of a persistent crisis in the local industry that has seen the collapse of several chains as the threat from online purchasing grows.

Golf, controlled by Len Blavatnik's Clal Industries, posted a net loss of NIS 14 million in the first quarter of this year, and reported a double-digit percentage drop in revenue and gross profit and a switch to an operating loss, which swelled on its way to the bottom line because of a rise in the finance expense.

Like those of rival fashion chain Fox, which reported earlier this month, Golf's first quarter results suffered from the late incidence of the Passover holiday, which is generally an occasion for spending on new clothing, and which this year fell in the second quarter. Golf's results were also affected by the closure of its anchor store in Hadar Yosef, which in previous years accounted for 3-4% of the group's revenue. The stores opened to replace it are still establishing themselves.

Golf's share price reacted to the release of the financials today with a 7% decline by the afternoon, on a small volume, but larger than average for the stock. This was partly a continuation of the negative sentiment towards the stock in the past few days, arising from fears of possible negative fallout from the crisis affecting the owners of the Topshop chain, of which Golf holds the Israeli franchise. Over the past year, Golf's share price has plunged 50%, bringing it to a market cap of some NIS 100 million, 85% below its peak of some NIS 1 billion towards the end of 2010.

As mentioned, Golf's top line, like that of the other players in the sector, was hit by the timing of the Passover holiday, and fell 12% in comparison with the corresponding quarter last year to NIS 195 million.

In addition, the results were affected by the longer winter season, which led to "higher than average discounts", and by a higher dollar exchange rate. Golf reported a quarterly operating loss of NIS 8.5 million, which compares with an operating profit of NIS 10 million in the corresponding quarter. The company's net loss of NIS 14 million compares with a net profit of NIS 7 million in the corresponding quarter.

"I have no doubt that the quarter is not representative," Golf CEO Raviv Brookmayer told "Globes", "both because of what happened in March, when in fashion we were still selling the winter collection and not the summer collection, as a result of the weather. I also have no doubt that the fact that Passover fell at the end of April shifted March holiday sales to April. In our unaudited numbers, in homewares too our position is better than that of the market."

Unusually, and in order to present a more optimistic picture that neutralizes the effect of the incidence of the holiday, Golf also released figures for the first third of the year, showing 4% growth in sales over the corresponding period of 2018, and 3% growth in same-store sales. It should be mentioned, however, that April this year also included an additional significant day for sales, the day of the general election on April 9, which was a public holiday and boosted sales for the entire industry.

On the crisis at Topshop in the US and the UK that has forced it to close dozens of stores, Brookmayer said today, "We in Israel continue with business as usual, and more than that, we want to open two stores in the near future in Rishon Lezion and in Haifa, which are currently the subject of negotiations that have not yet matured, to complete our deployment."

Golf also mentions that the personal imports ordinance recently signed by the minister of economy and industry will affect demand for its products, which is likely to affect their pricing substantially, and hence the group's financial position and its results.

Published by Globes, Israel business news - en.globes.co.il - on May 27, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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