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Delta Galil Increases 2019 Guidance as Sales and Income Pop in Q4

Delta Galil Industries finished 2018 on a high note, with strong gains in sales and income in the fourth quarter, and the company plans to grow key brands and sectors.

In a Nutshell: Delta Galil Industries, a manufacturer and marketer of branded and private label apparel, reported continued strength and improvements in Delta Galil Premium Brands, which it said delivered meaningful cost savings and efficiencies from operations under the leadership of Tim Baxter. The Tel Aviv-based company, which focuses on leisurewear, activewear and denim, in January brought in Simon Spurr as global creative director of 7 For All Mankind, and it sees long-term growth for the brand with new initiatives outlined to achieve it.

Delta Galil issued guidance for 2019 that includes an increase of 3 percent to 6 percent in sales to between $1.55 billion and $1.59 billion. Full-year earnings before interest and taxes (EBIT) is expected to range between $112 million and $117 million, representing an increase of 14 percent to 19 percent from 2018.

Full-year earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to come in between $189 million and $194 million, an increase of 45 percent to 49 percent from 2018. Full-year net income is forecast to rise 5 percent to 12 percent to reach between $64 million and $67 million.

Sales: Sales increased 22 percent to a record $454.3 million for the fourth quarter ended Dec. 31 compared to $371.6 million in the same quarter of 2017. Sales for the full year rose 10 percent to $1.5 billion from $1.37 billion for the 2017 full year. The company credited the growth in its Delta Galil USA, Delta Galil Premium Brands, Delta European Brands, including Eminence starting the third quarter, and Delta Israel units.

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Earnings: Net income was up 23 percent to $24.7 million in the fourth quarter compared to $20.1 million in the year-ago period. For the full year, net income dipped 2 percent to $48.2 million from $49 million in 2017.

Operating profit increased 18 percent to $38.4 million in the fourth quarter from $32.5 million in the year-earlier period. The company said the gain was mainly due to the increase in sales and the consolidation of Eminence group.

For the full year, operating profit fell 5 percent to $80.7 million from $84.6 million in 2017.

EBITDA was $50.2 million, or 11.1 percent of sales in the fourth quarter compared to $40 million, or 10.8 percent of sales in the same quarter of 2017. For the full year, EBITDA was $129.8 million, or 8.7 percent of sales, compared to $115.9 million, or 8.5 percent of sales, in 2017.

CEO’s Take: Isaac Dabah, CEO of Delta Galil, said: “We are very pleased with the continued momentum in our business, which was driven by Delta Israel, a strong second half for Delta Galil USA and fourth quarter improvements in Global Upper Market. During the year, we focused on consolidating the acquired Eminence Group and incorporating its brands Eminence, Athena and Liabel within the Delta Galil business. Additionally, going forward we are leveraging Eminence as a growth vehicle to expand our distribution of Delta Galil’s core products.”

“Overall, we will continue to grow both organically and through accretive acquisitions, while focusing on areas such as Asia and South America and our direct-to-consumer business. With a strong balance sheet in place, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value.”