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After Record Sales in Q4 and 2019, Delta Galil Taking Coronavirus Impact Charge

Sales in the fourth quarter and full year reached new highs at Delta Galil Industries, with double-digit growth in e-commerce.

In a Nutshell: Delta Galil will take a coronavirus one-time impact of $5 million to $7 million in 2020, cutting into an otherwise upbeat sales and earnings forecast for the global manufacturer and marketer of branded and private-label apparel products for men, women and children.

The company, which also makes and sells as leisurewear, activewear and denim issued initial 2020 guidance that included sales expected to reach $1.74 billion to $1.77 billion, an increase of 3 percent to 5 percent over 2019. Full-year 2020 earnings before interest and taxes (EBIT) is expected to range between $107 million and $113 million, representing an increase of 1 percent to 7 percent from 2019, including the COVID-19 one-time charge.

Full-year 2020 earnings before interest, taxes, depreciation and amortization (EBITDA) is projected to range between $197 million and $203 million, representing an increase of 1 percent to 4 percent. Full-year 2020 net income is expected to range between $57 million and $62 million, from 2019 actual net income of $60.2 million.

The company noted that during the fourth quarter it acquired online bra marketplace Brayola, whose fit technology keeps women from having to measure themselves. The deal is part Delta Galil’s online expansion strategy, and its performance exceeded expectations, the company said. In addition, the newly acquired men’s underwear brand Eminence continues to contribute to overall growth.

Delta Galil said in 2020, it will celebrate the 20th anniversary of the launch of denim brand 7 for all Mankind. A collection based on the original designs will highlight this year’s marketing drive for the jeans label.

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Delta Galil said it had a strong balance sheet in the wake of its acquisition of intimate apparel company The Bogart Group, highlighted by $506.9 million in equity as of Dec. 31 and $109.2 million in cash and cash equivalents.

Sales: Sales for the fourth quarter ended Dec. 31 increased 11 percent to a record $504.8 million from $454.3 million in the same quarter of 2018.

For the full year, sales increased 13 percent to a record $1.69 billion from $1.49 billion for 2018.

Earnings: Net income for the fourth quarter rose 44 percent to $35.6 million compared to $24.7 million in the year-ago quarter. Operating profit for the quarter increased 36 percent to $52.2 million. EBITDA rose 51 percent to $76.1 million.

For the full year, net income increased 20 percent to $57.7 million from $48.2 million in 2018. EBITDA increased 51 percent to $195.6 million.

CEO’s Take: Isaac Dabah, CEO of Delta Galil, said: “We are pleased to have concluded a strong 2019, as reflected in record sales, EBIT, EBITDA and operating cash flow. Our results were primarily driven by the strength of our global upper market, Delta Israel and European brands, coupled with our diverse blend of product categories and business segments. We continued to invest in our online sales growth engine, which presented a double-digit e-commerce growth. Our Vietnam factory turned profitable during the fourth quarter, and we expect that to continue into 2020.”

“Looking ahead, we remain focused on strengthening our product assortment with Bogart’s lingerie capabilities,” Dabah added. “We also plan to grow the Eminence ladies and kids products, while leveraging the European brands infrastructure for selling Delta products. As always, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value.”