Castro is building an ANTA business: profit contribution needs sales per square meter to cover launch costs
The five-year ANTA distribution agreement is expected to start in 2027 and requires about NIS 30m of investment, alongside talks to bring partners into up to 49% of the subsidiary. With apparel sales productivity under pressure and inventory days rising, the new brand has to prove operating margin after launch, rent and marketing costs.
Castro signed, through a dedicated subsidiary, a five-year distribution agreement with Anta Sports to distribute ANTA in Israel. Building a branded sports operation requires investment, inventory, selling space and potential partnerships before it generates revenue. The filing points to activity beginning in 2027 and estimates the investment at about NIS 30m, so the effect will not appear in the near-term financials. The business structure includes talks to bring partners into up to 49% of the subsidiary, while Castro is also examining the acquisition of lease rights, infrastructure and employees from existing points of sale for a one-time payment. A new sports brand requires inventory funding, rent and marketing exactly where Castro's 2025 reports already showed weaker store productivity and higher inventory days. The market gets a real commercial trigger here, but the economic value will be visible only when Castro discloses the store count, inventory funding model, partner terms and gross profit left after launch costs.
Building The Business: Investment, Stores And Potential Partners
The agreement gives Castro's subsidiary the right to distribute ANTA products in Israel for five years. Anta Sports, listed in Hong Kong, develops and manufactures sports products, footwear and apparel. It has about 10,000 stores, mostly in China, and about 250 points of sale outside China. Castro plans to market the brand through wholesale, physical stores and online channels.
The main economic fact in the filing is the investment requirement. Castro estimates that it will need about NIS 30m to launch the activity in 2027. In addition, the company is negotiating with third parties that may become shareholders in up to 49% of the subsidiary, while Castro keeps control. Those potential partners may also transfer lease rights, infrastructure and employees to the company for a one-time payment. These are still negotiations only, subject to binding agreements and conditions precedent.
The current disclosure signals a new activity with its own balance sheet: initial investment, opening inventory, stores, employees and marketing. It does not yet provide a basis for calculating future profit contribution. The right to extend the agreement beyond five years depends on meeting commercial targets, so continuity also depends on execution in the local market.
The Starting Point: Lower Productivity And Higher Inventory Days
ANTA enters Castro's portfolio after a mixed year for the apparel segment. In 2025, segment revenue declined slightly to about NIS 1.44bn, and operating profit fell to about NIS 115.7m, or about 8.0% of sales. The number of apparel stores rose to 182 and selling space expanded, but that expansion came with weaker profitability. Store rent and management fees reached about NIS 196.6m, or 13.6% of sales, and store wages reached about NIS 226.8m, or 15.7% of sales.
The key number for a new sports network is productivity per square meter. In 2025, same-store apparel sales declined, with a sharper decline in the fourth quarter. Monthly sales per square meter in the fourth quarter fell to about NIS 1,722, from about NIS 1,983 a year earlier. In same stores, they were about NIS 1,752 per square meter, down from about NIS 2,008. At the same time, apparel inventory days jumped to 230, from 181 in 2024. Introducing an international sports brand requires heavy opening inventory, store adaptation and launch promotions, which could add pressure to balance-sheet items that are already lengthening.
The internal brand mix also matters. In 2025, the Castro brand itself generated only about NIS 10.5m of operating profit on revenue of about NIS 600.3m, or an operating margin of about 1.7%. Hoodies was much more profitable, with about NIS 60.8m of operating profit and a margin of about 17.6%, but that too was lower than in 2024. Urbanica grew revenue, but its operating margin declined to about 8.9%. ANTA creates a distinct sports category inside a group whose existing store network is dealing with narrow margins.
Capital Structure And Partners Will Set The Risk Level
Castro has the financial flexibility to start such a move. At the end of 2025, the group had net cash surplus over financial debt of about NIS 362.6m and operating cash flow of about NIS 301.9m. Physical retail cash flow comes with heavy real cash uses. In the same year, Castro invested about NIS 101.8m in fixed and intangible assets, repaid about NIS 142.2m of lease liabilities, and distributed significant dividends after the Urbanica IPO.
A roughly NIS 30m investment in ANTA is meaningful relative to the thin operating margin in parts of the apparel business, even if it does not threaten the group's overall balance sheet. Bringing in partners for up to 49% could reduce Castro's capital needs or add operators that bring assets, employees and selling space. Acquiring lease rights and infrastructure for a one-time payment would add operating commitments before the brand has proven local demand.
The dedicated subsidiary and new distribution route are materially different from extending existing supplier agreements. In June, for example, Urbanica extended its agreement with YM Inc., a central supplier, by two years on broadly similar terms, preserving an existing model. Castro's reports also include a framework for allocating business opportunities among Castro, Urbanica and Hoodies, so the separate corporate route is not only technical. This separation needs to produce independent store economics instead of becoming another overhead source for the group.
The Retailors Context: A Different Operating Model
The closest local sports reference is Retailors, which operates Nike, Foot Locker and Converse stores. Its model shows why international sports-brand rights require far more than a sign above the door. Nike activity depends on concept stores with strict standards, location approvals, dedicated inventory management and heavy marketing. Foot Locker activity is based on an exclusive license, sales-based royalties and development commitments. Converse also includes distribution rights, store openings, e-commerce and royalties.
Retailors is not a ready-made multiple for Castro. It operates from a broad international sports infrastructure, long-standing brand relationships, and an established footwear and sports-fashion mix. Castro starts from a different place: a local fashion group dealing with sales-per-square-meter and inventory pressure. The ANTA move will depend on whether Castro can secure commercial, inventory and marketing terms that let it build the economics of a specialized sports retailer, beyond ANTA's global brand recognition.
At this stage, the data needed to build that model are missing: planned store count, average store size, launch cost per store, royalty rate, minimum purchase requirements, channel inventory split and the sales targets required for extending the agreement. Each of those variables can change the bottom line. Retail profit from a global brand is what remains after cost of goods, discounts, rent, wages, marketing and depreciation.
Next Milestones: Q2 Results And Store-Plan Disclosure
The next information point is Castro's second-quarter report on August 19, 2026. Those results will not yet include ANTA activity, but they will show the base that ANTA is entering: whether sales recovered after the security-related hit in the first quarter, whether inventory days are falling, and whether apparel gross margin is stabilizing. In a weaker core environment, the new brand has to generate unusually strong profitability to offset existing pressure, not only add revenue.
The market will also wait for the distribution plan. Positive signals would include binding partner agreements that lower Castro's capital burden, a gradual store rollout that does not add too much selling space at once, and an efficient inventory model. Heavy purchase commitments before demand is proven, high payments for lease rights, or rapid physical store openings before testing the brand online and through wholesale would raise the risk profile.
Castro has created a real business option with an upfront capital cost. A deeper presence in sports and better customer traffic will become material only if ANTA generates high sales per square meter and keeps operating margin after inventory, discounts, rent and marketing. Until the store plan and full commercial terms are disclosed, there is not yet a basis to treat ANTA as a certain profit addition in the financial statements.
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