Two months after officially announcing its entry into the children's clothing sector, Castro Model Ltd. (TASE: CAST) today launched its children's clothing chain. It opened 22 stores-within-stores at Castro branches today. Two more stores will be opened by the end of August, and the chain will have at least 34 stores by the end of the year.
Castro invested NIS 18 million in the chain. Sources inform ''Globes'' that that it expects more than NIS 100 million in annual sales. Castro's turnover was NIS 705.8 million in 2012, which means that the new chain will boost sales by at least 14%. In addition, except for the initial launch, the new chain will barely increase the company's overhead. If Castro meets its targets, this should improve its operating profit and boost its net profit. In 2012, the company posted an operating profit of NIS 74 million, 10.5% of sales, and a net profit of NIS 58.2 million.
Castro controlling shareholder and CEO Gabi Roter told "Globes", "We have the potential to improve the company's profitability. It's true that the investment in fixed assets is high, but we're talking about the same rent, the same expenses, and the same employee salaries. I don’t know by how much the profit margins will rise, because until the end-of-season sales, you don’t know what the profitability will be."
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2013
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