Urbanica reports record quarterly profit, yet shares remain 31% below IPO price
The fashion chain from the Castro-Hoodies group recorded a 70% jump in net profit to 30.6 million shekels and approved a 30 million shekel dividend. Despite improved margins, the stock, with a market cap of 1.03 billion shekels, has fallen by 15% year-to-date.
Urbanica, the fashion chain under the Castro-Hoodies group, has released its financial results for the second quarter of 2026, reporting a record net profit of approximately 30.6 million shekels—a 70% increase compared to the same period last year.
Revenue climbed by 22.6% to 278.9 million shekels, with operating profitability improving across all three business segments. The board of directors has approved a dividend distribution of approximately 30 million shekels, payable on September 2. Despite these results, the stock is trading 15% lower than at the beginning of the year and 31% below its IPO price from roughly 18 months ago.
The quarterly figures are robust: gross profit grew by 27% to 169.7 million shekels, with its margin rising to 60.9% from 58.7% last year. Operating profit surged by 60% to 57.2 million shekels, as the operating margin expanded from 15.7% to 20.5%.
It is important to note that the previous year's figures were impacted by Operation 'Iron Swords,' which partially paralyzed retail activity. Consequently, part of the current growth reflects a recovery from an exceptionally low base rather than purely organic operational improvement.
Notably, revenue growth is primarily driven by the expansion of the store network and retail space, while same-store sales have actually declined. The company currently operates 109 stores covering approximately 65,700 square meters and plans to open three additional locations by year-end.
The fashion accessories sector was a standout, more than doubling its operating profit by 178% to 8 million shekels, with margins climbing from 7.9% to 18%. The apparel sector, the group's largest, saw revenue grow by 32% to 151.9 million shekels, while the Hoodies segment grew by 8% to 82.2 million shekels, maintaining the group's highest operating margin at 21.7%.
Looking at the first half of the year, net profit actually fell to 25.2 million shekels compared to 29.8 million shekels last year. This indicates that the first quarter of 2026 was weak, likely resulting in a loss due to the impact of Operation 'Iron Swords' and unseasonably hot weather. The strong second quarter successfully offset the challenges of the opening quarter.
The company maintains high liquidity with approximately 350 million shekels in cash and no financial debt. Cash flow from operations for the quarter increased fivefold to 61.5 million shekels. The approved dividend represents a yield of approximately 2.9% based on the current market value.
The disconnect between operational performance and stock price remains a central concern for investors. The current valuation, significantly below the IPO price, reflects ongoing market caution regarding same-store sales trends and the broader strength of private consumption in Israel.
Yair Ohayon, Chairman of Urbanica and CEO of the Castro-Hoodies group, stated: "We are concluding the second quarter with record profitability, reflecting Urbanica's continued growth in both physical and online channels, supported by our accelerated expansion strategy. These results were driven by revenue growth, a favorable sales mix, and the positive impact of the shekel-dollar exchange rate."
Mariano Karp, CEO of Urbanica, added: "We continue to focus on accelerating expansion by increasing retail space and entering new categories to deepen our value proposition. Our new logistics center in Hefetz Haim is yielding results, allowing us to streamline our logistics system and providing an operational leap that supports our growth trajectory."
