Delta Galil battled rising freight and production costs but maintained strong gross margins in the first quarter.
In a Nutshell: Delta Galil Industries, a global manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim, said Monday that sales and net income reached record levels in the first quarter.
The company, based in Caesarea, Israel, reaffirmed its full year earnings guidance, reflecting double-digit growth in sales and profitability. Full-year 2022 sales for Delta Galil, which develops seamless apparel including bras, shapewear and socks; intimate apparel for women, and underwear for men, are expected to range between $2.08 billion and $2.14 billion, representing an increase of 7 percent to 9 percent compared to 2021 sales of $1.95 billion.
Full-year earnings before interest and taxes (EBIT) are forecast to be between $210 million and $220 million, for a gain of 12 percent to 17 percent compared to 2021 EBIT of $188.1 million.
Full-year net income is expected to range between $138 million and $145 million, representing an increase of 11 percent to 17 percent compared to 2021 net income of $124.2 million, while 2022 diluted earnings per share (EPS) is projected to come in at $4.80 and $5.09 for an increase of 8 percent to 15 percent compared to 2021 EPS of $4.44.
Delta Galil also designs, develops, markets and sells branded denim and apparel under the 7 For All Mankind brand, and ladies’ apparel under the Splendid brand. In addition, it sells its products under brand names licensed to the company, including Adidas, Wolford, Wilson, Spalding, Columbia, Tommy Hilfiger and others.
Sales: For the first quarter ended March 31, sales for brands such as 7 for All Mankind, Splendid, Schiesser and Eminence increased 16 percent to $483.9 million from $416.1 million in 2021 period.
Owned e-commerce website sales declined 22 percent in the quarter to $54.9 million, compared to $70.8 million in the first quarter of 2021. The decrease was primarily due to a decline in web traffic as customers shifted back to stores.
Earnings: Net income reached record levels as well, up 26 percent to $18.9 million, compared to $15.1 million in Q1 2021.
EPS grew 18 percent to 67cents from 57 cents in the first quarter of 2021. Operating margin reached record levels for the seventh consecutive quarter, the company noted, rising 40 basis points to 7.1 percent from 6.7 percent a year earlier.
Gross profit increased 15 percent to $183.3 million, compared to $159 million in the first quarter of 2021, driven by the strong growth in sales. Gross margins dipped to 37.9 percent from 38.2 percent of sales year due mainly to increased freight and raw material costs, partially offset by a favorable shift in customer mix and increased profitability of the company’s factories.
CEO’s Take: CEO Isaac Dabah said: “We are pleased with our strong first quarter results, which marked five consecutive quarters of record quarter revenue and seven consecutive quarters of record quarter operating margins. We delivered record quarterly EBIT and net income, driven by higher sales across all geographic regions, successful execution of our innovation-driven growth strategy and benefits from operating leverage.”
“We maintained strong gross margins despite rising freight and production costs,” Dabah added. “Looking ahead, our profitable growth trajectory, strong balance sheet and global workforce position us to meet our customers’ growing demands, while effectively managing our cost structure.”