Retailors 2025: Europe Is Pulling Growth Higher, but the Mature Store Is Weakening

Getting To Know The Company

Retailors is no longer just an Israeli sneaker chain. It is a global retail platform operating Nike and Foot Locker across several geographies under Fox control, with 283 stores at the end of 2025, including 121 in Israel, 26 in Canada, 83 in Europe, and 41 in Australia and New Zealand. On top of that it also operates 12 Samsung stores in Australia, 3 Converse stores in Israel, and two Mattel ecommerce sites in Australia. But the economics still sit in two real engines: Nike and Foot Locker.

There is real substance here. Revenue rose 6.7% to NIS 2.573 billion, gross profit rose 8.0% to NIS 1.338 billion, and Europe alone reached NIS 801.0 million of sales, about 31% of group revenue. Retailors is also still expanding geographically: France was added in practice in April 2025 through the acquisition of 12 Nike stores, and Australia and New Zealand continue to add volume after the 2024 RPG acquisition. Anyone looking for scale, international rollout, and access to strong locations can clearly see it.

But this is not a clean picture. The active bottleneck is the economics of the mature store. Nike same-store sales fell 15.3% in 2025, and Foot Locker same-store sales fell 3.2%, after Foot Locker had still posted 10.6% growth in 2024. Sales per square meter also weakened in both segments. Management excluded the June 2025 Am Kalavi closure period in Israel from the same-store metrics, so the weakness cannot be dismissed as just a one-off security event. This is already weakness inside the existing store base.

That is also the gap between a superficial read and the correct one. At first glance, you see higher revenue, a France entry, 34 net new stores, and a footprint across 20 countries. On a second read, you see that Israel and Canada actually shrank, inventory grew much faster than sales, and operating profitability weakened even while gross profit kept growing. What matters now is not whether Retailors knows how to open stores. It already proved that. The real question is whether it can stabilize the existing store and the cash profile after the expansion wave.

That is why the story matters now. Market cap stood at roughly NIS 1.63 billion in early April 2026. That is no longer the valuation of a concept stock. It is a valuation that wants to see a retail engine that still works after leases, inventory, and integration costs. Right now the market sees a platform that can still expand, but is not yet convinced that the existing store economics and capital flexibility are moving back in the right direction.

Here is the quick orientation map:

This chart explains why it is easy to misread the year. Total revenue is rising, but the growth mix changed. Israel fell 2.4%, Canada fell 16.4%, and almost all the incremental growth came from Europe and the Pacific. So 2025 is not just “the same engine, only bigger.” It is a year in which the expansion layers carried the headline while the older base became less comfortable.

Events And Triggers

France turned Europe into the main growth engine

The big event of 2025 was France. At the end of April the company acquired full ownership of a French entity that held 12 Nike stores, and completed the transaction on April 30, 2025. This was not just another store opening. It is one of the main reasons Europe jumped to NIS 801.0 million of revenue and 83 stores across 16 countries.

What it improved is clear. Europe became the largest growth layer in the group. In the capital-markets presentation the company also frames France as entry into a new country and Germany as the next expansion arena. But this is exactly where investors need to slow down. Growth through a franchise acquisition and new market rollout brings volume, but it also brings inventory, rent, integration costs, and purchase price allocation amortization. The move helps the top line, but it also raises the proof burden on profitability.

Early 2026 bought liquidity, not a solution to store economics

At the start of January 2026 the company received two loans totaling NIS 250 million at prime minus 0.25% to 0.3%, for five years, with no collateral and no financial covenants, for liquidity support and refinancing of existing debt. A day later it also received another NIS 100 million of loans and a EUR 13 million loan. In parallel, it repaid NIS 180 million of existing bank debt during January.

That matters, but it needs the right framing. This is not an abundance signal. It is a signal that the company is actively reshaping its funding structure and preferred to extend duration and improve terms rather than stay with a shorter structure. That improves immediate flexibility, but it does not change the fact that the mature store and the inventory load are still the core operating problem.

The dividend stop is a cautious signal

The company distributed a NIS 70.8 million dividend in March 2025, paid in late April. By contrast, at the March 18, 2026 board meeting it decided not to distribute a dividend at this stage, citing the security backdrop and its implications for retail. That may look minor, but it says a lot about tone. A management team that feels flush does not stop distributions right after refinancing. A management team that does this is clearly prioritizing cushion.

Efficiency, Profitability And Competition

The core story of 2025 is the gap between growth and comfort. Revenue rose, gross profit rose, but operating profitability weakened because semi-fixed costs and expansion friction grew faster. This is exactly the kind of year where it is critical to separate volume from the quality of that volume.

Gross profit rose, but operating leverage weakened

At the consolidated level gross profit rose 8.0% to NIS 1.338 billion, and gross margin improved to 52.0% from 51.4% in 2024. But selling and marketing expenses rose 14.8% to NIS 1.129 billion, and general and administrative expenses also moved higher to NIS 40.6 million. As a result, operating profit fell 21.2% to NIS 170.4 million, and operating margin fell from 9.0% to 6.6%. Profit attributable to shareholders fell to NIS 65.9 million from NIS 112.3 million.

That matters because it means the company has not lost its ability to sell. It has lost part of its operating leverage. The market is usually willing to forgive a year of openings. It is much less forgiving when that year also comes with negative same-store sales.

Nike remained the volume engine, but the store itself weakened

Nike ended the year with 179 stores versus 151 in 2024, and revenue up 7.5% to NIS 1.789 billion. On the surface that looks fine. But in the capital-markets presentation, on an IFRS 16-neutral basis, Nike operating profit fell to NIS 84 million from NIS 150 million. At the same time, same-store sales fell 15.3%, and sales per square meter fell to NIS 1,817 from NIS 2,286.

The company gives two partial explanations for the pressure. First, NIS 11.6 million of purchase price allocation amortization tied to the Australia deal in 2024 and the France deal in 2025. Second, about NIS 13.1 million of losses from closing 5 Nike stores in Europe. Both are real. But it is a mistake to stop there. Even after understanding those items, the same-store line is still deeply negative. That means part of the deterioration is integration and accounting, but another part is simply weaker economics in the mature store.

Another important point is that the same-store figures already exclude the June 2025 closure period in Israel. So even after neutralizing that disruption, the mature-store performance in Nike was weak.

Foot Locker stayed profitable, but lost the 2024 momentum

Foot Locker grew revenue 5.0% to NIS 651 million and ended the year with 89 stores versus 84. But quality weakened here too. Same-store sales fell 3.2%, after 10.6% growth in 2024, and sales per square meter fell to NIS 2,438 from NIS 2,523. In the presentation, IFRS 16-neutral operating profit fell to NIS 30 million from NIS 47 million.

That matters because Foot Locker is the older Israeli base engine, the one expected to be relatively stable. Once it also moves back into negative same-store territory, the pressure cannot be explained only by France integration or Europe store closures. The weakness also sits in the demand and productivity profile inside Israel.

Taken together, these three charts point to one clear conclusion: Retailors did not lose its ability to open and scale, but in 2025 it grew mainly through more stores, more space and more countries. That is not the same as clean growth in the existing store.

Competition is not new, but the game became less comfortable

The company itself describes intense competition from mono-brand chains, multi-brand chains and international online platforms such as Nike, Adidas, ASOS and others. The advantage it highlights is availability, physical experience, strong locations and long-standing commercial relationships with brands and landlords. That is still true. But if those advantages remain in place and same-store sales still weaken, the implication is that the environment has become harder. That could reflect consumer softness, rollout overload, category pressure, or some combination. There is no proof of a structural break yet, but there is clearly a yellow flag.

Cash Flow, Debt And Capital Structure

This is where framing discipline matters. For Retailors, the right question is not only how much operating cash flow it generated, but how much cash actually remained after real cash uses. That is why I am using an all-in cash flexibility lens here. I am not presenting a normalized cash-generation view, because the company does not split maintenance CAPEX from growth CAPEX in a way that supports a clean estimate.

Operating cash flow is positive, but very little is left after real cash uses

The group generated NIS 374.3 million of operating cash flow in 2025, down 11.3% from NIS 422.1 million in 2024. Even inside that figure, the friction is visible: inventory consumed NIS 96.5 million, and net interest and tax payments reached NIS 114.6 million.

But the more important number is what happens after the uses. In 2025 the company spent NIS 181.7 million on fixed assets, intangible assets and store-related outlays, NIS 240.8 million on lease principal repayments, NIS 70.8 million on dividends, NIS 44.5 million of net cash on the France acquisition, and NIS 57.6 million on loan repayments. That means the all-in cash flexibility picture was negative by about NIS 221.2 million before new borrowing. Only after NIS 219.0 million of new loans did the gap almost disappear.

That is the core cash-flow message. The business generates cash, but it does not yet generate true capital freedom. It generates enough to support ongoing operations, but not enough to comfortably fund leases, rollout, acquisitions and distributions at the same time.

Inventory rose much faster than sales

Inventory rose 26.1% to NIS 499.8 million, and inventory days rose to 148 from 123. The company explains that the increase mainly reflects additional inventory required to support the larger Nike store base across Israel, Europe, Canada, Australia and New Zealand, as well as larger Foot Locker selling space. That explanation is logical. But it does not remove the yellow flag. If same-store sales are negative while inventory days rise sharply, then the company is funding expansion with more stock at the exact time when output from the mature store is weakening.

The company also explicitly lists exposure to high inventory levels as a risk factor and notes that incorrect demand estimates can leave the group with excess inventory. This is not just a theoretical risk. In 2025 it already started to show up in the financials.

The balance sheet absorbed France, but became less comfortable

Total assets rose to NIS 3.713 billion from NIS 3.056 billion. Right-of-use assets rose to NIS 1.765 billion, and lease liabilities rose to NIS 1.876 billion. Equity fell to NIS 927.6 million from NIS 948.7 million, and the equity ratio fell to 25.0% from 31.0%.

Precision matters here. Lease liabilities are not the same thing as ordinary bank debt, and they should not be presented as if they were identical. But from a cash-flexibility perspective they are still very real obligations. NIS 240.8 million of lease principal repayments in 2025 is a very large number. At the same time, current bank debt rose to NIS 99.8 million and long-term bank debt rose to NIS 212.2 million. In other words, the layer above the store, the layer that is supposed to benefit from the broader footprint, also became heavier.

Liquidity did not break, but it is not expanding either

At year-end 2025 the group held NIS 357.6 million of cash and equivalents and NIS 153.2 million of short-term investments. In the board report, management summarizes this as NIS 411.1 million of net current financial balances, down from NIS 460.9 million a year earlier. That is still a cushion. But it is a smaller one, and it came after refinancing, not before it.

So the balanced read is this: there is no immediate liquidity crisis here, especially not after the January 2026 refinancing. But there is also no company whose expansion has already become comfortably self-funding.

Outlook

Before looking at 2026, this section needs to start with four non-obvious findings:

1. Most of 2025 growth did not come from the legacy markets. Israel and Canada fell, while Europe and the Pacific carried the story.
2. Same-store metrics already exclude the June 2025 closure period in Israel, so the weakness is not just a one-off security distortion.
3. The company managed to preserve gross margin, but not operating leverage. That is a more expensive weakness than a simple top-line wobble.
4. Operating cash flow stayed positive, but the all-in cash picture only nearly balanced after new debt. Growth is still consuming capital, not releasing it.

The conclusion from those four points is that 2026 looks like a proof year, not a victory lap. Retailors already built a serious international platform. Now it has to prove that the platform can return to better economics in the mature store, not just more volume.

The first test is the mature Nike store

If Nike keeps posting double-digit negative same-store sales, then every additional store only raises the quality question further. The nearest test is straightforward: stop the decline in same-store sales, and then begin a gradual recovery in sales per square meter. This does not need to be a peak year. It needs to be proof that 2025 was a digestion year rather than a deeper structural reset.

This is also where the market will test whether the closure of 5 stores in Europe was a one-off cleanup that helps 2026, or a sign that the company is still searching for the right model in every location.

The second test is Europe, not as geography but as economics

It is easy to look at NIS 801 million of European revenue and declare success. That is not enough. Europe needs to prove in 2026 that it can deliver both profitability and reasonable inventory velocity, especially after France. Otherwise it will remain a revenue layer that explains the headline, but not the improvement in economic value to shareholders.

The presentation adds another layer of optionality here: the company points to Germany expansion, signed stores, and new brand rollout such as Nike Skims in Australia. That is interesting. None of it replaces the need to prove the stores that are already open.

The third test is capital flexibility, not just EBITDA

In the presentation the company reports IFRS 16-neutral EBITDA of NIS 219.9 million. That is useful for understanding the earnings structure, but it is not the number that tells you how much freedom remains after leases, CAPEX and debt. So in 2026 the market is likely to focus far more on inventory, operating cash flow, lease repayments and the need for additional borrowing, and less on the accounting headline of EBITDA.

If the company can show lower inventory days, less expansion-related cash drag and better mature-store performance, the equity read can improve quickly. If not, each new layer of rollout may actually deepen market skepticism.

Q4 still did not show a clean repair signal

This matters because annual reports can hide the exit rate. In the capital-markets presentation, fourth-quarter revenue rose 4.9% to NIS 738.2 million and IFRS 16-neutral net profit rose 14.5% to NIS 49.6 million. But at the same time, Nike same-store sales fell 13.4% and Foot Locker same-store sales fell 4.1%.

So even the year-end exit rate did not look like a quarter in which the mature store had already stabilized. The quarterly headline was acceptable. Store quality still was not.

Risks

Dependence on licenses and brands is both moat and risk

Retailors is built on long-standing relationships with Nike and Foot Locker. That is one of its biggest strengths, but also one of its biggest risk concentrations. A quick look at 2025 procurement data makes clear how central Nike is to the group. If trade terms, approved opening pace, or license conditions change, the impact would be broad.

High inventory is not just a balance-sheet number

Inventory days at 148 is already a level that deserves respect. In sports-fashion retail, sell-through matters almost as much as sales themselves. When the legacy store base weakens while the company still carries more stock, the risk of heavier promotions, write-downs, or working-capital drag increases.

Leases and occupancy costs remain the heavy anchor of the model

The company paid about NIS 240.8 million of lease principal in 2025, and total lease liabilities reached about NIS 1.876 billion. That does not mean the model is broken. It does mean the company needs good output from the mature store to stay comfortable. In a footprint this large, a few weak quarters in the existing store base show up quickly.

FX, inflation and interest rates are still inside the numbers

The company operates in euro, Canadian dollars, Australian dollars and other currencies. It also explicitly states that the decline in sales per square meter was affected, among other things, by a stronger shekel against the operating currencies of its subsidiaries. At the same time, the report notes that inflation picked up again in Australia in the second half of 2025 and that further rate hikes there may still be possible. So part of the 2025 pressure was not purely internal.

Short-Seller Positioning

This data is more informative than it may look at first. As of late March 2026, short interest stood at 3.64% of float, with 5.07 days of SIR. That is below the February 2026 peak, but still clearly above the sector averages of 0.93% short float and 2.423 days of SIR. This does not look like a bet on a collapse. It looks more like a market position that doubts the cleanup story around store economics and cash flexibility.

This still needs to be read carefully. The short position is not extreme in absolute terms, but it is high enough to show that the market is not giving Retailors the benefit of the doubt. It is asking for proof.

---

Conclusions

Retailors ends 2025 as a larger, more diversified and more clearly European retail company. That is the positive side. The less comfortable side is that the jump has not yet translated into better mature-store economics, nor into broader capital freedom after all cash uses. That is why 2026 will not be judged here by the number of new openings, but by whether the mature store, inventory profile and cash picture start to improve together.

Current thesis in one line: Retailors remains a credible retail rollout platform, but 2025 showed that recent growth was bought with more space, more inventory and more leases while the mature store and operating profitability moved backward.

What changed versus the simpler historical read: up to 2024 it was easy to read Retailors mainly as a rollout and brand expansion story. In 2025 it needs to be read through the quality of sales in the existing store and through the amount of real cash left after leases, investment and debt.

The strongest counter-thesis is that 2025 was mainly a digestion year for France and Australia, and that after weak-store closures, improved debt terms and possible rate relief, profitability can recover faster than it currently appears. That is a serious argument. It is just not proven yet.

What could change the market read in the near to medium term is a combination of three things: a move back to healthier same-store territory, a stop to the rise in inventory days, and proof that cash after leases and CAPEX is no longer almost fully dependent on new borrowing.

Why this matters: if Retailors manages to connect the global footprint it already built with healthier mature-store economics, its operating leverage can look very different. If not, each new country may add mostly volume, inventory, leases and management load.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen, and what would weaken it:

• Nike same-store sales need to stop posting deep double-digit declines, otherwise the pressure will look more structural.
• Foot Locker needs to return to stable mature-store performance, otherwise even the older Israeli base will look weak.
• Inventory days need to stabilize or fall, otherwise growth quality will remain an open question.
• If the company keeps needing fresh debt to cover most real cash uses even after refinancing, the capital-flexibility read will weaken.