Retailors Ltd operates as a retailer in Israel, Canada, and Europe. The company sells sports and leisure footwear, apparel, and accessories under the Nike, Foot Locker, and Dream Sport brands. It operates 135 stores. The company is based in Airport City, Israel. Retailors Ltd is a subsidiary of Fox-Wizel Ltd.

Israel

Retailors Ltd

Consumer Cyclical

The company tries to pay dividends regularly but only sometimes does so. It has paid dividends in roughly half the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has been strong and significantly above its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends annually. 

RTLS.TA reported revenue of ILS 2 411mn in the last 12 months, up 25% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 16% from FY23 to ILS 2.25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 8ppts over six months and grown 1ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 21.7% in the last 12 months, a decline from 22.6% in FY23. 

Historically, RTLS.TA has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.7%, down from 6.7% in FY23. 

Retailors Ltd reported a return on equity (RoE) of 12.0% in the last 12 months, down from 13.7% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 3.8% in the last 12 months, a decrease from 4.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 5.1%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.5 in the past several years. This ratio implies a good shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RTLS.TA has poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day under normal market conditions. Liquidity is relatively stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth and robust profitability, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, an unfavourable capital structure.

In highly turbulent market conditions, RTLS.TA is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, RTLS.TA is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to mild. We would also like to highlight the mild intraday volatility of the instrument. 

From both historical and forecast perspectives, the stock is underpriced compared to similar stocks. In particular, the stock is overpriced on P/E, of fair value on EV/EBITDA, undervalued on P/FCF. 

Retailors Ltd

ILA 5874

5

Retailors Ltd

ILA 5874

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 5874

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