Fox Fashions Expands Stores, and Chases the Babywear Market

The office of Harel Wizel, CEO of the Fox clothing chain, is surrounded by boxes bursting with fashions for the upcoming winter season. Fox's offices, in the northern industrial zone of Lod - in a building that looks like a giant packing plant and whose first floor is a fully packed warehouse - are bustling with activity. Workers are preparing huge bundles of clothing for the stores; and the office door is constantly opening and closing as the workers consult their CEO on the preparations for the new season.

In the past year, Fox has opened 24 new outlets, and Wizel says he is planning to open another 33 in 2004, for a total of 150. Wizel, 37, is smiling and frenetic in a large red T-shirt and blue jeans. His office is modest and crowded, and the walls are adorned with pictures of his children, who have starred in Fox Kids catalogs.

Wizel says that 15 of the planned new outlets will be Fox Men stores. "We are a familiar brand as ladies wear stores in several malls, and there is no reason not to open menswear stores too," he says.

The other outlets planned for 2004 are 10 Fox Kids stores and eight Fox Baby stores. More Fox Women stores will be opened only if Wizel finds a particularly good location in an existing mall, or if a new and interesting shopping center is built.

Fox currently operates 43 stores for women, 17 for men, 29 for children, and 26 combined stores (for men, women and children). Two Fox Baby stores are due to open soon. In the second quarter of 2003, Fox's revenues totaled NIS 109 million - a 46-percent increase against the parallel quarter in 2002. Net profits have doubled, to NIS 11 million.

Wizel has no doubt that the opening of the Fox Baby stores is a wise move. "In another three years, the baby clothing market will belong to Fox," he says confidently, estimating that sales of baby clothing will top NIS 70 million in that time. "People are not looking for baby clothes that will be worn only once a month, for visiting grandparents, but for everyday clothing at reasonable prices."

Along with the opening of the baby fashion stores, Fox is working hard to expand its existing branches from an average of 80 square meters to 150 square meters. The new stores, like the one that opened over the summer in Herzliya's Arena mall, are large and spacious. The Fox Women stores at Haifa's Grand Canyon mall and the Ramat Aviv mall have likewise been enlarged; and last week, a larger outlet, which cost about $100,000 to set up, was opened in Dizengoff Center, in a space that had been occupied by a Castro store.

The spacious stores look like a reaction to criticism that Fox has changed its products and raised prices, but did not accompany such changes with better designing for the stores, in which items were piled up on crowded shelves. The new Fox Women stores are more like the Fox Men stores, which, from the outset, were set up on a larger format, with more display space. Wizel says that three more Fox outlets will soon be enlarged, at an average investment of $100,000 per store.

One of the chain's problems is its large inventory. At the end of the second quarter, its inventory was worth NIS 97 million (enough items for 163 business days), compared to NIS 71 million (also enough for 163 business days) at the end of Q2 in 2002, when Fox had fewer stores.

Wizel explains that some of the current inventory is for the winter season, but admits that the chain has a high inventory level. "We know that we can sell over NIS 100 million worth of goods in a quarter," says Wizel, "and it is clear that our profitability will improve if we manage to maintain a balance while lowering our inventory."

Wizel's plans include a significant improvement in the inventory due to changes in the production process. "Until now, it took a few months to develop our designs, a month to have them produced in China, and another month to ship them to Israel. We would order merchandise at the beginning of a season, and we had less flexibility in making changes in keeping with the popularity of certain items and the sales volume. Now we do most of the development in advance, so we have more flexibility."

"We have about 400 designs in each collection," continues Wizel. "This means that every year, we produce some 2,000 designs, including accessories. Our goal is to reach 4,000 items so that not everyone will be wearing the same things."

Wizel defines the clothing Fox sells as basic. "I'm not looking to sell an amazing dress for NIS 800; but nice dresses at NIS 150 are appropriate for our chain."

The chain's target audience is very defined. "I appeal to the 15-25 age group, and I have to be the best in this niche, even though it is clear that even people over 40 buy from us," says Wizel, noting that women's fashion accounts for about 40 percent of the chain's sales.

Fox is also expanding its accessories line - socks and underwear manufactured by Delta; school binders bearing the Fox logo and sold at stationery stores; Fox watches produced in conjunction with Gallery; and next month, the chain will launch a Fox telephone for children and teens. The telephone is a joint venture with Cellcom and will be launched next month after a joint advertising campaign that is being prepared by Zarmon Goldman, Fox's advertising agency. Wizel is also considering going into the swimwear field. "There is no serious player in this field just now," he says.

Wizel had also been considering branching out beyond Israel, starting with the Czech Republic, but has postponed these plans following a market survey. "It turned out that we would have difficulty attracting sales volumes similar to those in our Israeli stores," he says. "Maybe in another two years it will be worth opening outlets there, but the current purchasing power there does not justify the investment."

Over the past year, many fashion chains have opened more outlets and invested more in advertising, despite the recession. Wizel attributes their success to the drop in prices, due to reduced customs on imports from the Far East. Some of the chains that will set the tone for the future, according to Wizel, are Golf, Castro, Honigman and, of course, Fox; although other, more-fashionable chains may also step into the picture.

Fox Details:

Owners: The Wizel and Fox families, Leumi and Co. and the public. Fox first issued shares on the Tel Aviv Stock Exchange in April 2002.

Year established: 1995

CEO for marketing and outlets: Harel Wizel

CEO for production in Israel: Avraham Fox

Fox Women outlets: 43, of which 12 are franchises

Fox Men outlets: 17, of which three are franchises

Fox Kids outlets: 29, of which five are franchises

Fox Baby outlets: Two to be opened in September

Manufacturing: Some 84 percent in China, and around 16 percent at the company's factory in Tel Aviv

Revenues in 2002: NIS 362 million

Net profits in 2002: NIS 30.4 million