Hamashbir 365 Stock Plunges as Retailer Bets Big on Kenneth Cole Brand
Department store chain Hamashbir 365 struggles with declining revenues and a 50% stock drop, betting its future on an international partnership with Kenneth Cole.
Despite the broad market rally on the Tel Aviv Stock Exchange over the past two and a half years, department store chain Hamashbir 365 has seen its stock plunge by over 50% since the beginning of the year, reflecting a market valuation of under 95 million NIS. Controlled and managed by Rami Shavit, the veteran retailer has been grappling with a continuous decline in branch revenues, compounded by the security situation and heavy investments in the American fashion brand Kenneth Cole.
In the first half of the year, Hamashbir posted revenues of approximately 383 million NIS, marking a 13% drop compared to the same period last year. The decline was primarily attributed to the impact of Operation Roaring Lion, which forced the closure of all Hamashbir branches for a week in early March, as well as the company's delayed entry into the Israel Police fashion tender. The net loss for the half-year stood at around 9.5 million NIS, matching the figure from the corresponding period last year.
The Kenneth Cole Strategy and European Expansion
Looking ahead, Hamashbir is pinning its hopes on the American apparel and footwear brand Kenneth Cole. Last year, the retailer expanded its partnership by securing an exclusive five-year license to design, manufacture, and market Kenneth Cole products across the European Union, the UK, Switzerland, and Morocco. E-commerce giant Global-E, listed on Wall Street, invested $5 million for a 20% stake in this international venture.
The Kenneth Cole investment is currently registered as a loss, as such processes cost a lot of money, but we will balance out in the future. The potential here is enormous, said a source close to the company.
Furthermore, Kenneth Cole recently injected $3 million into Hamashbir's subsidiary in exchange for a 20% equity stake, alongside credit guarantees of up to $2 million. While international operations are still in their infancy—generating 1.3 million NIS in the first half—the domestic integration of Kenneth Cole across 38 Israeli branches has successfully lifted the company's operating profit margin to 4.3%.
Restructuring and Historical Context
Founded in 1944 by the Histadrut, Hamashbir was acquired by Rami Shavit in February 2003 on the brink of bankruptcy. Under Shavit, the group expanded aggressively in the 2000s, acquiring dozens of subsidiaries before heavy debts and personal tragedy forced a massive deleveraging and downsizing strategy. Today, management believes that exclusive brand differentiation will secure the long-term future of the historic retail chain.