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Global Strength Lifts Delta Galil Sales, but Strong Dollar Hits Export Profits

Hurt by a strong dollar, Israeli apparel manufacturer Delta Galil saw a drop in net income in the first quarter, though the company still increased full-year guidance.

In a Nutshell: Delta Galil Industries reported a strong performance from Delta Galil USA and a contribution from Eminence as it posted sales gains in the first quarter. The company, which develops innovative seamless apparel, and intimate apparel for women and underwear for men, as well as denim and apparel under the 7 For All Mankind brand, said it continued to improve efficiencies at its factories and expects “full operational status for 2019.”

The company reaffirmed its 2019 financial guidance, with full-year sales expected to range between $1.55 billion and $1.59 billion, representing an increase of 3 percent to 6 percent from 2018 sales of $1.5 billion. Full year earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to range between $189 million and $194 million, representing an increase of 45 percent to 49 percent from 2018 EBITDA of $130 million.

Full-year net income is expected to range between $64 million and $67 million, which would be a gain of 5 percent to 12 percent from 2018 net income of $60 million.

Sales: Sales in the first quarter ended March 31 grew 9 percent to $365.4 million from $334.5 million in the year-ago period. The gain largely reflected top-line growth in Delta Galil USA, Delta Galil’s Global Upper Market, Delta Israel and Delta European Brands, which included a strong contribution from its newly acquired Eminence business.

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Earnings: Net income in the period fell 59 percent to $3 million compared to $7.4 million in the same quarter last year.

Operating profit declined 25 percent to $10.4 million for the quarter from $14 million in the year-ago period. EBITDA increased 43 percent to $30.6 million in the quarter from $21.4 million a year earlier.

CEO’s Take: Delta Galil CEO Isaac Dabah, said: “We concluded the quarter with a 9 percent increase in sales and a significant improvement in cash flow. However, our first quarter results were impacted by the devaluation of the euro and Israeli shekel versus the U.S. dollar and a shift of holiday sales to the second quarter.”

“Still, we remain pleased as we continue to benefit from a diversified model, including a range of business segments, product categories and an expanded global presence that enables us to drive momentum and balance. As we look ahead, we remain committed to investing in new products and resources to deliver sustained profitable growth and long-term shareholder value. With a strong balance sheet in place, we have the necessary financial resources to continue to innovate and grow, both organically and through strategic acquisitions.”