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Delta Galil Scores First Quarter Profit and Sales Hike

Seamless apparel specialist Delta Galil turned a loss into a net income in the first quarter and saw sales pop 25 percent.

In a Nutshell: Delta Galil Industries, a global manufacturer and marketer of branded and private label apparel, reporting strong financial results for the first quarter, said full-year 2021 sales are expected to range between $1.78 billion and $1.82 billion, representing an increase of 5 percent to 8 percent from 2019 actual sales of $1.69 billion.

Full-year net income is projected to range between $81.5 million and $89.5 million, representing an increase of 35 percent to 49 percent from 2019 actual net income of $60.2 million.

Full-year 2021 diluted earnings per share (EPS) is expected to range between $2.95 and $3.25, for an increase of 25 percent to 38 percent from 2019 actual EPS of $2.36.

Full-year earnings before interest and taxes (EBIT) is expected to range between $140 million and $150 million, for an increase of 32 percent to 41 percent from 2019 actual EBIT of $106 million.

Full-year 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) is forecast to range between $240 million and $250 million, representing a gain of 23 percent to 28 percent from 2019 actual EBITDA of $195.6 million.

Sales: Sales in the first quarter ended March 31 increased 25 percent to $416.1 million, versus $332.7 million last year.

Delta Galil, which develops innovative seamless apparel for brands that include Schiesser, Eminence, Athena & Liabel and PJ Salvage, reported e-commerce own website sales rose 272 percent to $70.8 million compared to $19.0 million for the first quarter of 2020.

The company, which also owns the denim and apparel brand 7 For All Mankind, said e-commerce customers grew 83 percent to 54.6 million in the quarter from $29.7 million in the same quarter last year. “In terms of consumer trends, we are seeing a shift away from skinny jeans and toward high-waisted, wider-leg and boot-cut styles, which is being led by 7 For All Mankind,” Isaac Dabah, CEO of Delta Galil, told Sourcing Journal. “From a manufacturing standpoint, fabric prices are rising modestly, particularly in the denim category, which relies on cotton-based fabrics.”

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Earnings: Net income in the quarter was $15.1 million, compared to a net loss of $30.5 million in the first quarter last year. First quarter earnings per share (EPS) amounted to 57 cents versus a loss per share of $1.19 in the year-ago period.

Gross margin increased by 400 basis points to a record first quarter level of 38.2 percent compared to 34.2 percent in the 2020 period. Operating margin increased to a record first quarter level of 6.7 percent from negative 4.8 percent last year.

Operating cash flow improved $26.5 million to $31.3 million in the quarter. Delta Galil received $77 million in cash as a result of the Delta Israel IPO completion during the quarter. This, along with the strong free cash flow for the period of $21.4 million, supported further reduction the company’s net financial debt to its lowest level since January 2018–down 59 percent to $150.2 million.

CEO’s Take: Dabah said: “We are very pleased with our growth momentum and strong first quarter results, which reflect three consecutive quarters of record operating margin. Our operating profit increased significantly, driven by higher sales across all segments, with particular strength in our online sales, our gross margin improvement and the effective implementation of the efficiency measures we started to put in place at the middle of last year.”

“Our operating cash flow continues to be strong, enabling us to reduce our debt to the lowest level in the last three years,” Dabah added. “With our strong balance sheet, we have the necessary resources to deliver continued innovation and growth and we look forward to a strong year.”