Castro in Talks to Buy 50% of Hoodies Apparel Chain for $52m

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A Castro store front in Israel.
A Castro store front in Israel.Credit: Eyal Toueg

The Israeli fashion retailer Castro is in advanced talks to buy a 50% stake in Hoodies group, which includes the eyewear chain Carolina Lemke, the fashion accessories chain Top Ten and Hoodies itself, for 200 million shekels ($51.8 million).

The deal, which would value Hoodies at 400 million shekels and be paid for in part with shares, would mark a major expansion for Castro, whose market valuation on the Tel Aviv Stock Exchange today is 480 million shekels.

The Hoodies group operates about 220 shops and employs some 3,000 people, generating sales of about 600 million shekels annually.

It is controlled by several partners, some of them childhood friends, of whom Yossi Gabison is regarded as the dominant one. Not all the partners have equal, or in some cases, any shares in all the group companies. The Israeli supermodel Bar Refaeli has a 5% stake in Carolina Lemke and serves as brand spokesmodel, but she has no interest in the other businesses of the group.

Gabison is expected to continue managing the group after the 50% stake is sold to Castro, which is controlled by Gabi and Etti Roter.

Castro, which operates 156 stores under its own name as well as five cosmetics shops under the name of the French cosmetics company Yves Rocher, has been managed conservatively and has refrained from making big acquisitions, unlike its arch-rival Fox.

Like other Israeli clothing chains, however, it has struggled with excess retail space and high rents at the country’s shopping malls, where most of its stores are located. In the first quarter it reported a 2 million-shekel loss, turning around from a 5 million-shekel profit a year earlier. Still, that was less than Fox’s 20-million-shekel loss and a loss of 17 million shekels for another chain, Golf.

Hoodies is regarded as an aggressive player in the apparel market and is believed to be showing higher rates of growth than its more veteran rivals.

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