Delta Galil Q1 profits slump on currency impact, higher costs

By

Barbara Santamaria

Published
May 16, 2019

Israeli clothing manufacturer Delta Galil suffered a 59% nosedive in net profit from $7.4 million to $3 million in the first quarter of 2019, hit by the devaluation of the Euro and NIS against the US dollar and higher operating costs.

Despite this the company reaffirmed its full-year guidance on Wednesday, expecting net profit to be in the range of $64 million to $67 million this year, an increase of 5%-12% on 2018.

In the first quarter of 2019, the business - one of the world’s largest clothing makers - made $365.4 million in sales, up by 9% on the previous year. It reported EBITDA of $30.6 million, representing a 43% increase on the same quarter last year.

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Delta Galil manufactures branded and private label clothing for casualwear, loungewear, activewear and denim brands. 7 For All Mankind, Schiesser, Splendid, Ella Moss and Delta Israel are some of the directly-owned brands in its portfolio. Acquired in 2018, Eminence, a French underwear manufacturer, is one of the firm’s latest addition.

“We concluded the quarter with a 9% increase in sales and a significant improvement in cash flow; however, our first quarter results were impacted by the devaluation of the Euro and NIS versus the US dollar, and a shift of holiday sales to the second quarter,” commented Isaac Dabah, CEO.

“Still, we remain pleased as we continue to benefit from a diversified model, including a range of business segments, product categories and an expanded global presence, that enables us to drive momentum and balance. In the first quarter of 2019, we saw a strong performance from Delta Galil USA, Global Upper Market, and a contribution from Eminence.”

The group’s  Delta Galil Premium Brands business, which encompasses the 7 For All Mankind and Splendid brands was impacted by the shift in holiday and the depreciation of the euro, as well as the cost of opening new stores, but it remains “an exciting growth opportunity”, said Isaac Dabah.

“As we look ahead, we remain committed to investing in new products and resources to deliver sustained profitable growth and long-term shareholder value. With a strong balance sheet in place, we have the necessary financial resources to continue to innovate and grow -- both organically and through strategic acquisitions.”

Net financial debt increased to $361.8 million from $170 million. Delta Galil declared a dividend of $1.5 million, or $0.059 per share, to be distributed on 5 June.