Castro published its second-quarter report. It is the third in the sector to file in three days, and the three together tell one story.
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The Quarter
| NIS millions | The quarter | Share of revenue |
|---|---|---|
| Revenue | 580.5 | |
| Gross profit | 369.3 | 63.6% |
| Operating profit | 100.9 | 17.4% |
| Pre-tax profit | 58.9 | 10.2% |
| Net profit | 44.6 | 7.7% |
| Attributable to shareholders | 37.1 | |
| Non-controlling interests | 7.5 | |
| Basic earnings per share | NIS 4.30 | |
| Balance sheet total | 2,768.3 | |
| Shareholders' equity | 996.2 |
Three Retailers in Three Days
This is the comparison that turns the numbers into something meaningful:
| Q2 2026 | Revenue | Gross margin | Operating margin |
|---|---|---|---|
| Retailors | 594.4m | 51.8% | 5.2% |
| Castro | 580.5m | 63.6% | 17.4% |
| Urbanica | 278.9m | 60.9% | 20.5% |
And two conclusions emerge from this table.
The first: Retailors and Castro are almost identical in size - NIS 594.4 million against 580.5 million of quarterly revenue. And Castro earned 3.3 times as much operationally - NIS 100.9 million against about 30.8 million.
And the second: the gross margin does not explain the gap. Retailors stands at 51.8% and Castro at 63.6% - a gap of 11.8 percentage points. But at the operating line the gap is 12.2 points, meaning almost all of the gross gap survived, and then some.
Which means the three companies differ mainly in what happens between the two lines - in the cost of running the chain relative to the sales it generates.
And this is the point that recurs in all three: in retail, the gross margin is a starting point. The operating margin is the result.
What Happens Below the Operating Line
From NIS 100.9 million of operating profit, NIS 58.9 million was left before tax - that is, NIS 42.0 million was taken out, which is 41.6% of operating profit.
In retail this is largely leases. The leases standard presents shop rent as a right-of-use asset and a liability, and the interest on that liability falls below the operating line.
So at a chain of stores, part of what is economically "rent" appears as a financing expense. Anyone comparing operating margins between chains should remember that this line is affected by the scale of the leases and by their length.
Tax and Allocation
Pre-tax profit of NIS 58.9 million and net profit of NIS 44.6 - that is, tax of NIS 14.4 million, an effective rate of 24.4%.
Close to the Israeli corporate rate of 23%, and slightly above it.
And of net profit, NIS 7.5 million was allocated to non-controlling interests, and NIS 37.1 million to Castro's shareholders. That is, about 17% of the profit belongs to partners in subsidiaries.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
Three fashion retailers in three days is a rare opportunity, and I think the conclusion from them is sharp.
The gross margin in retail is the number people talk about, and on its own it is almost meaningless. The three companies range between 51.8% and 63.6% - a reasonable range - and at the operating line they range between 5.2% and 20.5%. A factor of four.
What separates them is the chain itself: how many stores, at what size, at what rent, and at what turnover per square metre. That is the part that does not appear in the structured filing, and it is the part that decides.
And Castro sits here precisely in the middle, but with one figure that sets it apart: it is almost identical in size to Retailors and earned three times as much. When two businesses in the same sector and of the same order of magnitude show a gap like that, the explanation is not in the market - it is in the operation.
And what I will follow is the stability of the operating margin across four quarters. A single quarter in retail is affected by seasonality - and the second quarter contains holidays, end of season and end-of-season sales. Only a sequence says anything about the structure.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
