Castro footwear. Next growth engine
צילום: דודי חסון
Castro considers leaving Germany
Israeli fashion chain disappointed by performance in Europe, plans on storming footwear market. 'We will do with shoes what we did with jeans,' says CEO
"By the end of the year, I will decide whether or not to close Castro Germany. Activities there burden Castro's balance sheets. The time has come for a decision," Castro CEO Gabi Rotter told Yedioth Ahronoth ahead of the Israeli fashion chain's expansion into the footwear market.
Castro started operating in Germany six years ago and currently runs eight stores in the country. Estimates are that activities in the Germany market have brought Castro NIS 30 million (about $8 million) in losses. Some of the loss was offset by an NIS 20 million compensation made by the chain's German partner when it quit.
"In hindsight, it seems it is hard to introduce a new brand to the saturated German market," said Rotter.
"The German market is conservative, leans more towards basics, and is not the most fashionable. There are brands there have operated for decades, and the German demographic needs time to adopt a new brand. In addition, Germany has the highest rate of retail spaces in Europe."
You have sustained losses there for six years. Why have you chosen to make a decision this year in particular?
"We suffered there from a significant decrease in the number of shoppers. The economic situation in Germany is not improved and the German consumer is disciplined and goes into a bunker. The sales turnover in Germany stands at about 10 million euro. This is about 10% of Castro's turnover, but it’s a loss."
Recently, all the members of Castro's Germany headquarters were let go, including its German CEO, and the store's activities were incorporated under Castro Israel.
"I reached the conclusion that the headquarters in Germany don't give us the big picture in real time," said Rotter. "Now we sent two senior officials from Israel with their families to sit in the headquarters in Cologne – Noam Sivan, manager of international operations, and Shahar Via, a region manager. They are trying to improve performance while examining prospects. One of the options they will consider is leaving two flagship stores open, and that's it."
Overseas operations were supposed to be your growth engine. Is there an alternate engine?
"What we did with jeans, we will now do in the footwear category. We will be the leading brand in fashion footwear for men and women. We feel as though now we are mature enough to capture the footwear market. We expanded the offerings to 100 models that will be sold in the 'store within a store' method within the branches. To this end, we are in a massive process of expanding and renovating eight stores.
"I believe that we can achieve more than 10% market share in shoes. These are shoes by our design with high quality and reasonable prices. The average prices will be 20% less than what was offered last year. At the next stage, we will focus on handbags as a complementary accessory.
"At the beginning of the year, we have 13% growth in the footwear category. The objective is to double sales in the category over the upcoming winter. This category will be our growth engine. What we did with jeans, we will now do with shoes."
How do you sum up Castro's performance against the international chains that recently came to Israel?
"We made the decision to emphasize our distinction as an Israeli brand versus the global brands. We are David against Goliath and the appropriate Israeli response to foreigners. The fact is that we are in an upward growth trend as opposed to the brands from abroad, even in comparison with other Israeli brands. We grew 10% in sales in the first half of the year."
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