Adika reports provide a glimpse into the formidable challenges of the fashion industry

Despite the effects of Corona – the online retailer Adika Which is controlled by Golf (62%) ends the corona year and the year of departure of founder Dedi Schwarzberg with a 41% increase in revenue, which in 2020 amounted to NIS 218 million. The net profit tripled to about NIS 4 million.

Adika notes that this is a significant increase in its online sales activity, so that the significant damage recorded to its revenues – which resulted from the closure of the stores – is compensated by the online activity.

Despite the positive trends regarding growth in activity, the effects of the Corona crisis are still present in the network’s reports regarding significant challenges that are also expected to characterize larger players in the fashion industry – including recruitment, inventory rolling effects and significant increases in import costs.

Overseas activity soared

An increase of 41% was also recorded in revenues from Adika’s own operations, which amounted to NIS 193 million. At the same time, in its revenues from services it provides to the parent company Golf, for operating the group’s online sites, there was a 46% increase to a total of NIS 25 million.
This income from the operation of Golf’s online sites is expected to cease on September 30 following the termination of the contract between the two, when even earlier Adika’s consideration for the operation of the Topshop network will be reduced, due to the closure of the chain’s stores in Israel and abroad and its sale to Asus.

Adika’s operating revenues abroad increased by 328% in 2020 and amounted to NIS 65 million – accounting for nearly half of the company’s sales in Israel, and they caused Adika an operating loss of NIS 1 million, compared with a loss of NIS 7.8 million in 2019. Sales, management and Clalit notes that Adika recorded expenses of NIS 15 million during 2020, mainly marketing and support for its international operations abroad.

The company’s gross profit increased by 31% to NIS 107 million, but its share of sales eroded to a profitability level of 49% in 2020, compared with 53% in the previous year. Adika attributes this erosion to the increase in international activity, which is characterized by relatively high shipping costs.

The Company’s gross profit in Israel also eroded to a level of 56.2%, which Adika attributes to a significant increase in import costs and the effects of the closure. At the same time, it has, as stated, enjoyed an increase in the gross profit from the services it provides to golf sites, in view of the increase in the scope of their activities.

Adika, managed by Roi Hasel, is an online fashion retailer that also operates through physical stores, and since 2019 It also went into operation in the US, and last January Has also set up an online site for sale in the UK.

Change in company management

Last April Leaving Adika founder and CEO Dedi Schwarzberg Against the background of disagreements with the controlling owner of the company, Golf, which is controlled by Clal Industries, and after A long line of senior executives have left, including the CFO. The company is traded at a market value of NIS 335 million, reflecting an increase of about 30% since the beginning of 2021.

Another impact of the Corona crisis to which Adika refers in the reports is the enormous difficulty in recruiting workers due to the government’s policy on the issue of HALAT. Another impact concerns its supply chain, which has been significantly affected by cross-border traffic restrictions and reduced cargo flights, cancellations and significant increases in fares The air freight, which led her to carry out part of her freight by sea.

The Corona crisis has shaken fashion companies in Israel and abroad in terms of inventories from previous seasons and their storage costs. This has a “significant effect on the company’s inventory capacity”, noting that “this also leads to excess logistics costs and may even affect the company’s sales capacity in the short term”.

Disclaimer of application

Adika recorded a decrease in value of NIS 1.5 million for the app’s own development, estimating that it will not be used, since it is “based on a system that is no longer supported”, and as long as there is a desire to use the app, it will be redeveloped with another technology.

The employment cost of Roi Hasel, CEO of Adika, which owns 1.52% of the company’s shares, was NIS 2.7 million in 2020, of which NIS 691,000 was salary costs, and the rest was a share-based payment.

Looking to the future, it is estimated that the company will continue to grow revenues from Adika’s operations in Israel and abroad, as it enjoys a boost from the market thanks to the positive momentum enjoyed by online retailers abroad, but in the next two years it will also have to deal with significant damage to its revenues. In 2022) due to the cessation of the provision of services for the operation of the Golf Group’s online sites.