Fox Follow-Up: What Is Really Wearing Down the Sports Engine
The pressure inside Fox's sports engine does not start at the revenue line. Retailors added space and stores, but same-store sales fell 11.6% and sales per square meter dropped to NIS 1,979. That makes the next France and Germany openings a test of store economics and capital discipline, not just of growth.
What Is Really Wearing Down
In the main article I argued that the 2025 pressure point did not sit only in inventory or in cash flow. This follow-up isolates Retailors, because that is where the sharpest segment-level erosion sits: it is the group’s largest revenue segment at NIS 2.573 billion, and it is also the segment that took the biggest profit step down versus 2024.
The easy mistake is to look at the revenue increase and assume the sports engine merely hit a short pause. In reality, what weakened was not the ability to open stores or the ability to keep strong brands. It was the economics of the existing store base. Revenue rose 6.7%, but average selling area rose 26.2%, store count increased to 283 from 249, and monthly sales per square meter fell to NIS 1,979 from NIS 2,341.
The sharpest datapoint sits inside the comparable base. Across 135 same stores, with no change in selling area and no change in the sub-brands sold there, sales fell 11.6% in 2025. Even after neutralizing the 12 disrupted days in June, that is still a weak number. In other words, the problem is not only new stores that have not matured yet. It is also the core that was already supposed to be working.
One more point matters. 98.2% of segment revenue comes from directly operated stores in Israel and abroad, and only 1.8% comes from wholesale and other channels. That means weaker store productivity is not an accounting side story. It is the engine.
That chart shows why more stores did not solve the issue. The network expanded fast, but each new square meter generated less.
This Is Not Just a Brand Issue, It Is an Operating Leverage Issue
The weakness in the sports engine does not first show up in gross profit. In fact, gross margin improved to 52.0% from 51.4%, and gross profit itself rose to NIS 1.338 billion from NIS 1.239 billion. If the analysis stops there, the segment can still look fundamentally healthy.
But the erosion starts immediately below that line. Segment operating profit fell to NIS 172.4 million from NIS 219.8 million, and operating margin fell to 6.7% from 9.1%. The presentation tells the same story on a cleaner operating basis: excluding IFRS 16, operating profit fell to NIS 158 million from NIS 180 million. In other words, this is not only a lease-accounting effect. Even after stripping that out, the segment earned less.
The reason is visible in Retailors’ own summary table. Rent and management expenses increased by NIS 30.2 million, depreciation on fixed assets increased by NIS 28.1 million, and the group kept carrying a bigger network with more stores, more area, and more operating cost. That is why the NIS 99.2 million increase in gross profit did not reach the operating line. It was absorbed by negative operating leverage.
There is even an interesting contradiction here. Average monthly sales per employee actually rose to NIS 80.3 thousand from NIS 74.2 thousand. So not everything that weakened was sales efficiency per worker. What weakened more sharply was the economics of the footprint: how much revenue each square meter can generate, and how much rent, depreciation, and operating expense each store has to carry.
| Key metric | 2024 | 2025 | What it means |
|---|---|---|---|
| Segment revenue | 2,411.4 | 2,573.3 | Growth still exists |
| Segment operating profit | 219.8 | 172.4 | Profit deteriorated despite growth |
| Gross margin | 51.4% | 52.0% | The problem is not primarily pricing or markdowns |
| Same-store sales | (6.6%) | (11.6%) | The core became weaker, not stronger |
| Monthly sales per sqm | 2,341 | 1,979 | Each square meter is doing less work |
| Capital spending on new branches | 198.8 | 196.0 | The investment burden stayed high |
This is the answer to the question in the headline. What is wearing down the sports engine is not Retailors’ presence. It is the collision between weaker same-store economics and a network that keeps getting larger, more expensive, and more capital hungry.
International Expansion Raises the Bet
Retailors did not respond to the weakness by slowing expansion. It did the opposite. In April 2025 it acquired 12 Nike stores in France, then opened 3 additional Nike stores there during 2025 and enlarged one existing store previously operated by the former franchisee. In 2026 it plans to open another 5 to 10 Nike stores in France. At the same time, from May 2025 it began expanding in Germany and plans to open 15 to 30 Nike stores there between 2026 and 2028, with estimated investment of EUR 15 million to EUR 30 million.
Australia stayed aggressive too. After the RPG deal, Retailors completed 4 store refurbishments in 2025, opened 3 new stores, and acquired one store from a franchisee in strategic locations. In other words, management’s answer to weaker productivity is not to stop expanding. It is to try to drive through it.
That can work, but only if the current problem is temporary. If same-store weakness mostly reflects a Nike transition year, the war in Israel, or the digestion of newly added stores, aggressive openings in France and Germany can rebuild growth. But if the problem runs deeper, meaning persistent deterioration in the productivity of the average store, expansion will only add another layer of rent, depreciation, working-capital needs, and execution risk.
The 2025 numbers already show where to look. Operating working capital rose to NIS 493.6 million from NIS 469.5 million, while capital spending on new branches remained high at NIS 196.0 million. Those numbers do not prove distress. They do show that the sports engine now needs more capital to produce less productivity per unit of selling area.
There is another contextual layer that matters. Retailors itself notes that Nike globally expects a low single-digit revenue decline in the coming year and frames the period as a strategic turnaround year. That helps explain why local management keeps deepening its Nike partnership and opening new territories. But it also means the next expansion phase is happening while the anchor brand itself has not yet returned to an easier footing.
What Has To Be Proven Next
The right way to track the sports engine through 2026 and 2027 is much sharper than simply asking whether Retailors opened another store. The real questions are different:
- Do same-store sales stop deteriorating, even without help from an easier comparison base.
- Does sales per square meter stop falling and start to stabilize, because that is where the core problem sits.
- Do the new France stores open on better store economics, rather than only adding revenue and another layer of cost.
- Does the Germany plan remain phased and performance-based, rather than becoming a premature capital commitment.
Conclusion
In the main article I argued that Fox’s weakening earnings quality does not come from one place. This follow-up sharpens the point that the most sensitive place right now is Retailors. The sports segment is still large, still growing nominally, and still built on strong brands. But 2025 showed clearly that growth is coming through more area and more stores while the existing store is producing less.
Current thesis: Fox’s sports engine is not wearing down because it lacks openings or brands. It is wearing down because store productivity is weakening at the same time as the network becomes larger and more expensive.
Best counter-thesis: One can argue that this is mainly a transition year for Nike and Retailors, so the France and Germany openings will hit a weak base and bring operating leverage back.
Why this matters: As long as 98.2% of segment revenue still comes from directly operated stores, the key question is not how fast the network can expand. It is how much profit each new square meter can actually produce.
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