a Fashion group Castro Reports Near-Zero Profit in Q1 of 2025 Despite a Revenue Growth

Fashion group Castro released its first-quarter financial results for 2025, revealing a sharp decline in net profit to just NIS 138,000, down from NIS 3.9 million in the same quarter last year — despite a notable 8.3% increase in revenue, which reached NIS 471 million.

The company's gross profit rose by 9.9% to NIS 254.5 million, making up 54.1% of revenue, yet operating profit fell by 4% to NIS 20 million, signaling underlying profitability challenges.

While top-line performance improved, cash flow from operating activities dropped significantly to NIS 9.5 million, compared to NIS 60.4 million in the same period last year. Additionally, excess cash over debt declined to NIS 58.6 million, down from NIS 102.1 million in Q1 2024 and NIS 133.5 million at the end of 2024.

Castro Brand Continues to Struggle

Focusing on the Castro brand specifically, revenue dipped slightly from NIS 138 million to NIS 136 million. The brand recorded an operating loss of NIS 8.3 million, an improvement from NIS 11.1 million in Q1 2024. The number of operating Castro stores also declined significantly — from 95 to 80 locations.

Still, same-store sales across the group grew 6.9%, driven by:

• Fashion clothing: +7.8%

• Fashion accessories: +5.4%

• Skincare and cosmetics: -0.1%

Yves Rocher U.S. Operations Post Losses

A particularly concerning development came from the Yves Rocher U.S. operations, which Castro holds a franchise for. The American expansion posted an operating loss of NIS 5.8 million in the quarter. As a result, Castro has canceled its retail store leases and announced a strategic pivot to focus solely on online and wholesale sales in the U.S. market.

Analyst Raviv Cohen commented on the report, stating:

“Castro’s report presents mixed results. On the one hand, revenues increased, but on the other hand, profits were zero. Alongside very successful activities such as Urbanica and Hoodies, the Castro brand still weighs on the profit line — albeit less than before. The Yves Rocher activity in the U.S., with the decision to cancel lease contracts, adds another layer of complexity.”

Outlook Uncertain as Strategy Shifts

As Castro navigates its changing retail landscape, the group is banking on its stronger-performing subsidiaries and digital-first strategies to stabilize performance. However, continued losses from underperforming brands and foreign ventures may pose a risk to long-term profitability.