Fox-Wizel Ltd. (FOX), also known as Fox Group, is an Israeli-based fashion chain that specializes in personal fashions, accessories, home fashion, atmosphere, care products, and sports.
It was founded in 1995 and became a public company in 2002 listed on the Tel-Aviv Stock Exchange. Fox Group operates in 1005 stores in 20 different countries with over 200 thousand square meters of retail space.
Fox Group is the leading retail group in Israel in most of the areas where it operates, with an ever-growing portfolio of partnerships with homegrown and global fashion and lifestyle brands. The company owns important brand names in Israel such as Fox, Shilav, Laline, and others. It also owns licenses (sometimes exclusively) to sell merchandise from large global brands such as Nike, Foot Locker, Mango, Billa Bong, and The Children’s Place in Israel and other locations. The company operates in 4 segments:
- Fashion and Home Fashion: Fox, Fox Home, American Eagle, Aerie, The Children’s Place, Mango, and Yanga brands. This segment contributes ~39.8% to gross earnings.
- Atmosphere and Care Products: Laline brand. This segment contributes ~5.4% to gross earnings.
- Sport and Sportswear: Nike, Foot Locker, and Dream Sport brands. This segment contributes ~31.2% to gross earnings.
- Others: Sack’s, Quicksilver, Element, Billabong, Shilav, and other brands; the Terminal-X online shop; and Fox Labs, among others. This segment contributes ~23.6% to gross earnings.
The company operates what is probably the biggest loyalty program in Israel with over 2 Million members which in year 2022 made up 56% of the purchases at their stores.
From the company’s website:
“Fox Group offers consumers a comprehensive shopping experience; what they want, when they want, and where they want it, with online and in-store capabilities at an unparalleled level.
With our constant drive, more than 1000 stores worldwide, online capabilities, complete supply chain resources, solid financial status (listed on TASE), and the most extensive loyalty program membership in Israel, we see only opportunities on every horizon.
Fox Group’s retail leadership is built on an extraordinary history of anticipating trends, logistical excellence, and a win-win approach to our brand portfolio partners and customers. Our strategy is to build on this infrastructure to focus on further global expansion, lead through tech & Innovation and leverage our track record of outstanding execution.”
Most of the products distributed and sold by the company are made in China, which could be a headwind for the company if the Shekel continues to deprecate against external currencies. Another challenge for the company is that in the three main segments where the company operates, same store sales have grown in the last 3 years yet seem to be slowing down. At the same time, revenue per square meter trended down, which shows that rising costs and inflation are affecting the bottom line. And if we are talking about inflation, 23% of the company’s long-term debt is Prime-indexed (Prime is the Bank of Israel’s Interest Rate), and as inflation has risen so has the Prime, which is currently at 4.75%.
The revenue per share of Fox Group has grown in the last 10 years from 70.75 ILS to 349.9 ILS, which is an impressive growth of 394.5%, or 17.33% annually. Really impressive!
Earnings per share have also grown quite well, from 6.25 IL in 2012 to 15.42 ILS in 2022, an absolute growth of 146.72%, or 9.45% annually, which is much less than revenue. Furthermore, some years have seen EPS growth while others have seen EPS shrinkage. This will make me more cautious in my decision to invest or not in this company and on the amount to invest on it.
In August 2021, the company’s directors declared a dividend policy of distributing 75% of net earnings, overriding a previous distribution policy of 50%. This increase can be seen in how the dividends almost tripled from 2020 to 2021.
Overall Fox-Wizel is an interesting company. In Israel it already owns much of the marked and I think the it’s growth potential here is not large. I like how the company’s CEO and partial owner has passion for his business and is trying to grow in other markets to create more shareholder value. Another negative point for me is their increased dividend distribution, which kind of shows that the company does not know what to do with its cash other than distribute it to shareholders. This may be good in the short term, but a warning sign for the long term.
Disclaimer – Don’t own shares on the company, may buy a small amount after having done this analysis.
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