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Judging by its first-quarter financial reports released yesterday, clothing manufacturer and retailer Castro isn't suffering from the effects of the recession and the intense competition in the fashion sector.

Castro, which operates the Castro and Castro Man retail chains, posted improvements across the board, signaling to investors that it's business as usual at the fashion house.

Net profits for the company were up to NIS 6.3 million, from NIS 5.7 million in the corresponding quarter last year. Most of the growth in net profits came from a 13 percent increase in sales, which were up to NIS 80 million, compared with NIS 71 million during the same period of last year.

One of the factors that has, till now, enabled Castro to ride out the downturn in the economy and the drop in the number of people shopping at malls - where several of Castro's outlets are located - in light of the security situation is the increase in the number of the company's stores.

Castro, the chain's women's fashion outlet, now has 44 stores - up from 41 in the parallel quarter last year. In September 2000, the company launched Castro Man, which now has 26 stores - up from 16 stores in the parallel quarter of 2001. The addition of 13 stores overall gave a significant boost to the company's revenues.

However, Castro CEO Gabi Roter refused to comment on figures for the company's stores that operated both in the first quarter of 2001 through to the first quarter of this year.

Yesterday figures showed that the company's operating profits had increased to NIS 40.8 million, from NIS 36.8 million in the same quarter of last year. Despite an 11 percent growth in gross profits, gross profit margins fell by almost 1 percent, to 50.9 percent, compared with 51.8 percent in the first quarter of 2001.

Roter attributed the fall in gross profit margins to the devaluation of the shekel against the dollar - Castro buys most of its products in dollars - and said that the fall in gross profit margins had been offset by financing revenues of NIS 245,000.