Drowning in Debt, Honigman Fashion Group Files for Court Protection From Creditors

With some 150 stores and 1,000 employees, the 70-year-old fashion group is drowning in debt

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A Honigman branch in Azrieli Mall, Tel Aviv.
A Honigman branch in Azrieli Mall, Tel Aviv.Credit: \ Eyal Toueg

The Honigman fashion retail group filed for court protection from creditors Wednesday. The group operates three major Israeli clothing chains: Honigman Women, Honigman Kids and TNT, which appeals to younger consumers. The group has about 150 stores around the country and a workforce of about 1,000.

Owned by Yaakov and Micha Honigman, the group has its origins in a single children’s clothing store that opened in Tel Aviv in 1947, just before Israel’s establishment. It incorporated as Honigman and Sons about 30 years ago. Around a month ago, the group announced a change at the top: the departure of CEO Kobi Moiseh, who was replaced by the company’s former CEO, Micha Ronen.

The filing for court protection from creditors was made in the Nazareth District Court. The court ordered the appointment of an accountant, Boaz Gazit, and a lawyer, Keren Reichbach-Segal, as trustees during the period of the stay, which at this point was ordered for 60 days. The trustees were given authority to run the company, seize assets, promote various business interests and run the retailer during the period of their appointment.

Reacting to the court filing, a senior executive at a shopping mall development firm said: “The writing has already been on the wall for the past two or three years.” Referring to competing retailers, he said: “Castro and Renuar know how to adapt themselves to the international brands that have come to Israel when it comes to design collections. Honigman didn’t manage to do that. Also with respect to pricing, Honigman Kids was expensive for a children’s sector that has gotten many new and inexpensive competitors from abroad over the past year. The Israeli public no longer wants to pay a lot of money.”

The source said he assumed the Honigman group would find a buyer. “When all is said and done, it’s a long-standing good Israeli chain with good and decent shareholders who have invested their own money and tried, but they were still left behind and didn’t manage to make the adjustment and move forward in the sector.”

The retailer issued a statement saying: “The Honigman group is a long-standing and leading fashion firm in the Israeli fashion market and has over its many years in operation has attracted a loyal clientele and has been a source of pride for more than 70 years.”

The main issue at hand is the continued operation of the firm “that will enable the company to set out on a new path,” the statement said.

The request for protection from creditors comes a day after discount clothing retailer Yafo-Tel Aviv, which has 17 locations, filed for protection after racking up tens of millions of shekels of debt. Many clothing retailers are facing a number of problems including excess store space, competition from online retailers and Israelis who shop for clothing on trips abroad. There are also other challenges, including high rents and rising salary costs.

In 2017, Israelis spent 2.5 billion to 3 billion shekels ($708 million to $850 million) buying clothing online, mostly on foreign websites, the Czamanski Ben Shahar consulting firm reported. And the drop in airfares on flights to and from Israel has helped create a situation in which Israelis spend another 1.1 billion shekels a year in purchases abroad, leaving 15 billion shekels for the Israeli retail clothing sector.

Last year, there was a 3% drop in sales per square meter at the country’s leading malls, according to Retail Information Systems Israel, whose data is drawn from 2,800 stores that were in operation last year and the year before. The drop is even more significant when inflation and the roughly 2% annual growth in the country’s population is factored in.

The late arrival of winter also led to a sharp drop in December 2017 sales revenues, which were 15.3% less than December 2016. For the first 11 months of 2017, the drop was modest — around 0.19%. The major victims of the drop in December were clothing and shoe retailers, which saw sales drop by an average of 18%.