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Delta Galil Ups Outlook After Strong Quarter But Warns of Tariff Impact

Buoyed by a diversified portfolio, Delta Galil upgraded its fiscal outlook, but warned of the potential impact of tariffs on its U.S. business.

In a Nutshell: Delta Galil Industries, a global manufacturer and marketer of branded and private label leisurewear, activewear and denim, scored substantial gains in sales and income in the third quarter.

The company, with brands that include Schiesser, Eminence, Athena & Liabel, PJ Salvage, 7 For All Mankind, Splendid and Ella Moss, said the quarter was the first time consolidated results were reported for the Bogart Group, purchased in June. Delta Galil said it intends to leverage its strong market position going forward, particularly in the U.S.

In addition, the company said it plans to focus on growing the Eminence women’s and kids’ products, while taking advantage of the European brands’ infrastructure for selling other products in the company’s cadre.

Delta Galil, based in Tel Aviv, Israel, updated its 2019 financial guidance, including the impact from expected higher tariffs on imported products from China to the U.S. and costs related to the recall of damaged goods shipped to a primary customer, which in total are estimated to be up to $4 million.

Full-year 2019 sales are now expected to range between $1.65 billion and $1.69 billion, representing an increase of 10 percent to 13 percent from 2018 actual sales of $1.5 billion. Full-year net income is expected to range between $60 million and $62 million, coming in flat or at an increase of 3 percent from 2018 actual net income of $60 million.

Sales: Sales for the third quarter ended Sept. 30 increased 20 percent to $446.1 million from $370.8 million in the third quarter of 2018. E-commerce sales on Delta’s own website grew by double digits.

Earnings: Net income increased 46 percent to $14 million in the quarter from $9.6 million in the same quarter of 2018. Operating profit grew 57 percent to $26.7 million in the period compared to $26.7 million for the same quarter last year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 46 percent to $51.5 million.

CEO’s Take: Isaac Dabah, CEO of Delta Galil, said: “We are pleased with our third quarter results, which reflect our balanced and diversified mix of businesses, products and markets. We benefited from a strong performance of our socks and seamless categories and our Global Upper Market and Delta Israel segments. We successfully concluded the acquisition of The Bogart Group. Looking ahead, we will focus on driving organic growth and seek new opportunities to apply our competitive and financial strengths to deliver shareholder value.”

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