Terminal X in the first quarter: the brand house is working, shareholder profit barely moved
Terminal X reported 23% revenue growth and a sharp improvement in its independent brands, but profit attributable to shareholders rose only about 5% and short-term net financial balances fell to NIS 84.3 million. The quarter answers part of the integration test, while opening a cleaner test: how much of the new profit is truly accessible to shareholders after minority interests, inventory and dividends.
Terminal X opened 2026 with a quarter that fixes one of the main concerns from 2025: the independent brands no longer look only like an expensive revenue engine, but like a real source of profit improvement. Revenue rose 23.0%, operating profit before share-based compensation rose 42.3%, and the independent brands lifted that margin to 15.3% despite gross-margin pressure from deeper customer promotions. But that improvement still does not pass fully to the shareholder layer: consolidated net profit rose to NIS 7.9 million, while profit attributable to the company's shareholders rose only to NIS 5.9 million, about 5% above the comparable quarter, because a larger part of the profit stayed with non-controlling interests. Operating cash flow recovered to NIS 13.0 million, but inventory continued to rise, lease and debt payments absorbed almost all of the cash flow, and short-term net financial balances fell to NIS 84.3 million before a NIS 10 million dividend paid after the balance-sheet date. The quarter therefore improves the business story, but it does not close the capital-allocation test. The next proof points are sustained double-digit profitability in the brands, a recovery in the core activity after the store-closure costs leave the base, and an end to cash erosion after inventory, leases and dividends.
The brand house is now working, the core less so
Terminal X is no longer only a multi-brand online fashion site. It is a combination of an e-commerce platform, five independent brand sites, wholesale activity and six physical stores. The economic engine this quarter is a mix of growth and profitability in acquired brands, alongside a larger core activity with weaker margins.
Group revenue was NIS 138.9 million, up 23.0%. The core Terminal X site activity grew 8.7% to NIS 103.5 million, while the independent brands almost doubled revenue to NIS 36.0 million. About 68% of the external revenue increase came from the independent brands, partly because Ainker has been consolidated since July 2025 and Ronit Yam since October 2025. This is not clean organic growth, but it is a first proof that the acquisitions are already moving the income statement.
The operating KPIs support the same reading, with one important caveat. Active customers rose 8.2% and orders rose 11.6%, while site visits fell 6.1% and the average basket declined from NIS 418 to NIS 410. The company is selling more through more transactions and more active customers, not through a larger basket or stronger traffic. That fits a quarter in which the independent brands add volume, but it does not yet prove that the core platform has returned to a strong growth path.
The brands closed one test, not the shareholder test
The positive point in the quarter is that the independent brands are no longer only adding revenue. Their operating profit before share-based compensation rose to NIS 5.5 million from NIS 1.2 million, and the margin rose to 15.3% from 6.4%. That answers part of the question left open in the brand-house analysis: whether the segment can start creating value, not only add acquired revenue.
The quality of growth is still not perfect. The independent brands' gross margin fell to 67.8% from 70.5%, and the company ties that decline to deeper customer promotions. The operating-profit improvement came from a better cost structure as revenue grew, not from cleaner pricing power. If promotions remain a central part of the acceleration, the brands can still look good in operating profit while looking weaker in growth quality.
The core activity is less convincing. Revenue grew, but gross margin fell to 41.1% from 42.7% because of a change in the products sold, and operating profit before share-based compensation fell to NIS 7.0 million from NIS 7.6 million. Part of the weakness comes from a one-time NIS 1.8 million cost related to closing the Sarona store, while the comparable quarter included one-time income from settling a lease agreement at the Haifa Bay store. Even after those adjustments, the core still has to show that site growth is recovering without relying on store closures or on the improvement in acquired brands.
The most important gap sits below consolidated profit. Consolidated net profit rose 30.2% to NIS 7.9 million, but profit attributable to the company's shareholders rose only 5.4% to NIS 5.9 million. Non-controlling interests received NIS 1.9 million of profit, compared with NIS 0.4 million in the comparable quarter, and their share of consolidated profit rose to about 24.5% from 6.8%. When the growth and profit engine sits in companies that are not wholly owned, consolidated profit is not the same as the profit left for the public company's shareholders.
Cash flow recovered, the cash picture did not
The cash test is better than it was in 2025, but it still does not create full capital freedom. In the prior capital-allocation analysis, the question was whether profit would start turning into cash after inventory, leases, debt and acquisitions. In the first quarter, operating cash flow was NIS 13.0 million, compared with NIS 1.3 million in the comparable quarter. That is a real improvement.
The all-in cash picture for the quarter, after actual cash uses, is still negative. This is an all-in cash flexibility test: operating cash flow less investments, debt repayment, lease repayment and distributions to minority holders. On that basis, the company ended the quarter with a roughly NIS 4.0 million cash decline before foreign-exchange effects, and a NIS 4.4 million decline after those effects.
| First-quarter cash layer | NIS million | Meaning |
|---|---|---|
| Operating cash flow | 13.0 | Recovery from an especially weak quarter in 2025 |
| Net investing activity | -3.2 | Mainly property, equipment and intangible assets |
| Net financing activity | -13.8 | Leases, loan repayment and distributions to minority holders |
| Cash change after foreign-exchange effects | -4.4 | Cash kept falling despite positive operating cash flow |
| Dividend paid after the quarter | -10.0 | A cash use already shifted into the second quarter |
Working capital explains why the strong cash-flow number needs caution. Receivables declined by NIS 10.6 million and contributed cash, but inventory rose by NIS 16.0 million and continued to absorb cash. The improvement versus the comparable quarter also reflects a smaller working-capital drain, not a model that already generates surplus cash after all uses.
There is no liquidity-stress signal here. The capital-to-balance-sheet ratio for the bank covenant was 41.1% against a 20% requirement, and the bank loan fell to NIS 20.0 million. But that is exactly why the question is capital allocation, not survival: how much cash remains after the company continues to finance inventory, stores, leases, dividends and brand acquisitions.
The next quarters decide whether this is proof or transition
The first quarter moves the company closer to a proof year for the brand house. If the independent brands keep a double-digit operating margin without another round of gross-margin pressure, one of the main objections to the acquisition model will weaken. If the core activity returns to margin improvement after the Sarona closure costs leave the base, it will be easier to read the growth as broad rather than acquisition-led.
The friction with the controlling shareholder was not resolved this quarter. Fox remains the controlling shareholder and an important source for part of the brand activity, while the contractual questions raised in prior coverage remain a checkpoint. The new class-action request filed after the balance-sheet date around Dream Card and customer benefits does not currently look like a material financial event under the legal advisers' view, but it is a reminder that the link between loyalty club, customers and controlling shareholder is not only a marketing advantage. It is also an exposure layer.
The current conclusion is positive but still not clean: the independent brands have started to show profitability, and they now carry the segment-profit improvement. Against that, the core activity has not yet proved a margin recovery, a larger share of profit remains outside the shareholder layer, and net cash continues to decline even before the dividend paid in April. The next reports will likely focus on profit that reaches shareholders, cash that remains after inventory and leases, and better clarity on the controlling-shareholder economics. That will determine whether 2026 becomes a real proof year or another transition stage.
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