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Digital Strength Curbs Loss at Delta Galil

Sales and income were pared for Delta Galil in the fourth quarter, but e-commerce jumped 183 percent.

In a Nutshell: Delta Galil Industries, a global manufacturer and marketer of branded and private-label apparel based in Tel Aviv, said it ended the year with a strong balance sheet highlighted by $231.7 million in cash and $476.4 million in equity.

Net financial debt declined nearly 30 percent to $236.3 million. The company said it completed the initial public offering (IPO) of Delta Israel Brands, its Israeli subsidiary, which raised $80 million in a post money valuation of $400 million from leading Israeli institutional investors.

The company said with a strong management team in place and a solid financial performance this past year, the IPO represents an important achievement and a natural step in the evolution of Delta Israel Brands as a leading brand in Israel for underwear, pajamas and leisurewear for the entire family.

Sales: Sales for the fourth quarter ended Dec. 3 fell 9 percent to $459.7 million compared to $504.8 million a year earlier, primarily due to reduced volume in Delta Galil Premium Brands, Delta USA and Global Upper Market business segments following the outbreak of Covid-19.

Delta’s own e-commerce sales rose 183 percent for the fourth quarter to $76.1 million, compared to $26.9 million for the fourth quarter of 2019. For the year, owned e-commerce sales increased 130 percent to $152.5 million.

Sales for the 2020 full year decreased to $1.45 billion compared to $1.69 billion for 2019.

Earnings: Net income for the fourth quarter was $23.7 million compared to $35.6 million in the fourth quarter of 2019. Excluding one-time items, net income was $27.3 million for the fourth quarter of 2020 compared to $34.8 million in year-earlier period.

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For the full year, Delta Galil reported a net loss of $40.5 million versus net income of $57.7 million for 2019. Excluding one-time items, net income was $3.8 million for 2020 compared to $60.2 million for 2019.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $71.9 million in the fourth quarter compared to $76.1 million in the year-ago-period.

EBITDA for the full year was $144 million versus $195.6 million for 2019.

Gross margin in the quarter increased 300 basis points to a record level of 40.1 percent versus 37.1 percent in the year-ago period. The operating margin increased 0.3 percent to a record level of 10.4 percent versus 10.1 percent in the fourth quarter of 2019.

Fourth quarter earnings per share (EPS), excluding one-time items, amounted to $1.08 in 2020 versus $1.37 in 2019. For the year, the diluted loss per share was $1.56 compared to earnings per share of $2.26 for 2019. Excluding one-time items, diluted EPS was 18 cents for 2020 compared to EPS of $2.36 for 2019.

CEO’s Take: Isaac Dabah, CEO, said: “Without a doubt, 2020 represented an unprecedented year for Delta Galil, as COVID-19 forced us to rethink ways in which we conduct business. I am pleased with our agility to respond to the pandemic and implement the necessary initiatives to reduce costs and improve our operational and financial flexibility. Consequently, we saw record gross and EBIT margins in the fourth quarter, and record operating cash flow for the year, demonstrating a strong combination of Delta’s rapid online expansion, coupled with the strength of our brands, loyal customer base and the effects of our strategic efficiency measures, which we foresee continuing in the future.

“Throughout the year, we remained committed to pursuing growth online both on our own site and through our Internet customers,” Dabah added. “As we previously announced, Delta acquired online intimates retailer Bare Necessities, which enhances our presence in the digital world. We ended the year with strong online sales, and we will continue to look for new ways to excel digitally.”