Delta Galil Reports Record Third Quarter 2022 Sales and EBIT

 Sales Increased 2% vs. Comparable Quarter, (or 6% in Constant Currency), to a Record $512 Million

EBIT Increased 4% vs. Comparable Quarter to a Record $55.1 Million or 10.8% of Sales

Diluted Earnings Per Share Rose 14% to $1.32, with an 11% Increase in Net Income  

Company Declares a $6 Million Dividend for Third Quarter 2022

Updates Full-Year 2022 Guidance to Reflect Impact of Global Headwinds, Foreign Currency Challenges and Inflation Pressures

Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange; the “Company”), the global manufacturer and marketer of branded and private label intimate apparel, leisurewear, activewear and denim products for men, women and children, today reported financial results for the third quarter and nine months ended September 30, 2022.

Third Quarter 2022 Highlights

• Sales reached a record of $512.0 million, increasing 2% (or 6% in constant currency) from $501.1 million in the third quarter of 2021.
• Diluted earnings per share increased 14% to $1.32, from $1.16 in the third quarter of 2021.
• Net income increased 11% to $36.1 million, from $32.5 million in the third quarter of 2021.
• EBIT in the third quarter set a record of $55.1 million or 10.8% of sales, increasing 4% from $53.0 million, or 10.6% of sales, last year; the increase was driven by record sales, SG&A leverage and capital gains.
• EBITDA excluding IFRS 16 impact, increased 5% to $63.9 million, from $60.7 million in the third quarter of 2021.
• Delta Galil strengthened its commitment to sustainability, while enhancing its digital capabilities through recently-acquired Organic Basics.
• The Company declared a dividend of $6 million, or $0.234 per share, to be distributed on December 6, 2022. The record and “ex-dividend” date will be November 29, 2022.

Isaac Dabah, CEO of Delta Galil, stated: “We are pleased to report another quarter of record sales and EBIT—particularly given current challenging economic conditions. Demonstrating the continued strength of our diversified business model, our results were driven by sales growth in constant currency in the Private Label, 7 For All Mankind and Delta Israel segments, while sales in our Brands segment and Other—which mainly includes the results of Bare Necessities—were negatively impacted by global demand headwinds, changes in foreign currency exchange rates, and inflation pressures.”

“Importantly, during the quarter we remained focused on delivering our core value proposition to our customers and shareholders. We already began integrating recently-acquired sustainable underwear brand Organic Basics, and we plan to grow the business globally and into new categories in the second quarter of 2023. We continue to strengthen our digital expertise, while we strategically expand our businesses in order to best position us to develop the most innovative, high-quality products for our customers worldwide.”

"As the retail industry continues to face a difficult economic environment, we believe that Delta Galil’s strong value proposition, diversified business model and reputation for innovation will enable us to successfully navigate challenging market conditions.”

Sales

The Company reported sales of $512.0 million, a 2% increase (or 6% in constant currency) from $501.1 million in the third quarter of 2021. Sales in constant currency increased across all geographies in the third quarter of 2022. Sales in the first nine months of 2022 were $1,487.1 million, an 8% increase (or 11% in constant currency) from $1,373.0 million in the same period last year.

Digital Sales

E-commerce sales on the Company’s own websites were $49.0 million in the third quarter, representing a 7% decrease (or 3% decrease in constant currency), compared to $52.4 million in the third quarter of 2021. E-commerce sales on the Company’s own websites in the first nine months of 2022 were $157.4 million, representing a 16% decrease from $186.4 million in the same period last year. The decline followed a shift in consumer behavior back to physical retail stores after COVID-19 related lockdowns. Excluding Bare Necessities and Organic Basics, which were acquired in October 2020 and July 2022 respectively, own websites sales in the third quarter and first nine months of 2022 increased by 68% and 88%, respectively, compared to the same periods in 2019.

EBIT

EBIT in the third quarter increased 4% to $55.1 million, from $53.0 million last year. In the first nine months of 2022, EBIT increased 4% to $127.8 million, from $123.4 million in the same period in 2021. In the first nine months of 2022, EBIT before non-core items increased 8% to $133.3 million, compared to $123.4 million for the same period last year.

Net Income

Net income increased 11% to $36.1 million, from $32.5 million in the third quarter last year. Net income excluding non-core items, net of tax, was $36.1 million, compared to $36.4 million in the third quarter of 2021.

Net income in the first nine months of 2022 increased 4% to $77.7 million, from $74.8 million in the first nine months of 2021. Net income excluding non-core items, net of tax, in the first nine months increased 6% to $83.2 million, from $78.7 million in the comparable period last year.

Diluted Earnings Per Share

Diluted earnings per share rose 14% to $1.32, from $1.16 in the third quarter of 2021. Diluted earnings per share attributable to the Company’s shareholders, before non-core items, net of tax, attributable to the Company’s shareholders were $1.32, compared to $1.31 in the third quarter last year.

Diluted earnings per share in the first nine months rose to $2.79, compared to $2.70 in the same period of 2021. Diluted earnings per share attributable to the Company’s shareholders, before non-core items, net of tax, for the first nine months, increased to $3.00 from $2.85 in the comparable period in 2021.

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA excluding IFRS 16 impact increased 5% to $63.9 million, from $60.7 million in the third quarter of 2021. For the first nine months of 2022, EBITDA excluding IFRS 16 impact increased 7% to $158.5 million, from $148.1 million in the comparable period last year.

Operating cash flow excluding IFRS 16 impact and non-core items was a use of $36.1 million for the quarter, compared to positive operating cash flow of $4.7 million in the third quarter of 2021. Operating cash flow excluding IFRS 16 impact and non-core items in the first nine months of 2022 was a use of $104.4 million, compared to $63.0 million in the first nine months of 2021. The year-over-year reduction in operating cash flow reflects elevated investments in working capital, primarily due to increased inventory, to better support growth and accommodate longer logistics lead-times.

Net financial debt as of September 30, 2022 was $281.7 million, compared to $134.8 million as of September 30, 2021, and $95.2 million as of December 31, 2021. The increase in net debt is primarily due to investments in working capital.

Equity on September 30, 2022 was $658.6 million, up 8% compared to $609.9 million one year earlier.

Delta Galil declared a dividend of $6 million, or $0.234 per share, to be distributed on December 6, 2022. The record and “ex-dividend” date will be November 29, 2022.

2022 Financial Guidance

Delta Galil’s 2022 guidance excludes non-recurring items and includes IFRS 16 impact, and it assumes no major resurgence of the COVID-19 pandemic that could lead to quarantines and/or lockdowns in any countries in which the Company sells or manufactures its products.

Delta Galil is revising its revenue and earnings outlook to reflect increased negative impacts from foreign currency fluctuations as well as heightened inventory levels and increased promotional activity in the marketplace.

* Sales negatively impacted by ~$60M / 3% versus prior year (Q4 estimated EURO/USD 1.00; USD/NIS 3.52).

**Before non-core items, includes IFRS 16 impact

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with IFRS accounting principles (“GAAP”), which include translation and transactional impacts from foreign currency exchange rates. The release also refers to “constant dollar” amounts, which exclude the impact of translating foreign currencies into USD (U.S. dollars), and is considered a non-GAAP financial measure.

These constant currency performance measures should be viewed in addition to, and not in lieu of, or superior to, Delta Galil’s operating performance measures calculated in accordance with GAAP.

About Delta Galil Industries

Delta Galil Industries is a global manufacturer and marketer of branded and private label apparel products for men, women and children. Since its inception in 1975, the Company has continually endeavored to create products that follow a body-before-fabric philosophy, placing equal emphasis on comfort, aesthetics and quality. Delta Galil develops innovative seamless apparel including bras, shapewear and socks; intimate apparel for women; underwear for men including under its owned brands Schiesser, Eminence, and Athena; babywear, activewear, sleepwear, and loungewear including under its owned PJ Salvage and Delta brands. Delta Galil also designs, develops markets and sells branded denim and apparel under the brand 7 For All Mankind®, and ladies’ and kids’ apparel under the brand Splendid®. In addition, it sells its products under brand names licensed to the company, including adidas, Wolford, Wilson, Columbia, Tommy Hilfiger and others. For more information, visit www.deltagalil.com.

Safe Harbor Statement

Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may" "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein, and while expected, there is no guarantee that we will attain the aforementioned anticipated developmental milestones. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, product, and distributor performance, the impact on the national and local economies resulting from terrorist actions, and U.S. actions subsequently; and other factors detailed in reports filed by the Company.

Source: Delta Galil Industries, Ltd.

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