CAESAREA, Israel--(BUSINESS WIRE)--Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange), the global manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim apparel for men, women and children, today reported financial results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights (comparisons are to prior year period unless otherwise noted)
- First quarter results were in-line with the Company's plan, and 2023 annual results are expected to meet the lower end of the Company’s guidance range
- Sales decreased 9% (6% in constant currency) to $442.5 million
- Gross margin improved 120 basis points to a first-quarter record of 39.1%
- EBITDA excluding IFRS 16 impact decreased 33% to $28.5 million
- Diluted earnings per share before non-core items decreased 61% to $0.26
- Operating cash flow excluding IFRS 16 improved $63.6 million to $11.0 million
- Second consecutive quarter of inventory reduction, reflecting a total reduction in inventory of $61.6 million since September 30, 2022
- The Company declared a dividend of $4 million, or $0.156 per share, which will be distributed on June 6, 2023, with a record and “ex-dividend” date of May 24, 2023
Isaac Dabah, CEO of Delta Galil, stated, “Our first quarter performance was in line with our 2023 plan and expectations. During the quarter, we increased direct-to-consumer sales across both our own websites and our stores. In addition, we managed to reduce our inventory for the second consecutive quarter, while achieving a record first quarter gross margin, despite the heavily promotional retail landscape. We believe these positive trends demonstrate the strength of our brands and customers, and the resiliency of our business model. We continue to focus on further streamlining our operations, strengthening our supply chain, and expanding our product portfolio to meet evolving consumer demands.”
Mr. Dabah continued, “We believe we will see growth in sales and profitability in the second half of the year driven by a solid pipeline of new customers and licenses, as well as multiple new brand launches, including a new collection for the recently acquired Organic Basics."
“We believe we are well positioned to navigate the current market environment, while streamlining our operations and investing in strategic growth opportunities. In the first quarter, we generated $11.0 million in operating cash flow, excluding IFRS 16, and ended the quarter with a strong balance sheet and an equity position of over $700 million. We are proud of our exceptional team that drives our success by upholding our commitment to extraordinary innovation, design, and thought leadership,” concluded Mr. Dabah.
Sales
The Company reported first quarter 2023 sales of $442.5 million, a 9% decrease (6% in constant currency) from $483.9 million in the first quarter of 2022.
Gross Margin
Gross margin in the first quarter of 2023 increased to a first-quarter record of 39.1%, compared to 37.9% in the first quarter of 2022. The increase in gross margin was due primarily to better customer, channel and segment mix and lower freight costs, partially offset by negative foreign currency impacts, higher discounts, and loss of cost economies from lower production volumes.
EBIT
EBIT in first quarter 2023 was $14.4 million compared to $34.2 million last year. EBIT before non-core items (detailed below) in first quarter 2023 was $19.8 million compared to $34.2 million last year.
Non-Core Items
As part of the Company's strategic focus to improve its production flexibility, capabilities and competitiveness, and to further streamline its operations, the Company approved a restructuring plan which includes actions to:
- shut down the Bare Necessities distribution center and transition to a third-party fulfillment center in Mexico,
- relocate its Egypt cut and sew operations from Cairo to El-Minya,
- shut down its socks production facility in Bulgaria, moving production to a new facility in Egypt, and
- implement efficiency measures in the Company’s 7 for All Mankind segment.
Total cost of the plan--included in first quarter results as a non-core item--amounted to $5.4 million (including a $3.9 million cash impact). The Company estimates annual savings from the plan at approximately $7 million, a portion of which will be realized in 2023.
Net Income
Net income for first quarter 2023 was $3.0 million, compared to $18.9 million in the first quarter last year. Net income excluding non-core items, net of tax, was $7.8 million, compared to $18.9 million in the first quarter of 2022.
Diluted Earnings Per Share
Diluted earnings per share for first quarter 2023 decreased to $0.08, from $0.67 in the first quarter of 2022. Diluted earnings per share attributable to the Company’s shareholders, excluding non-core items, net of tax, were $0.26, compared to $0.67 in first quarter 2022.
EBITDA, Cash Flow, Net Debt, Equity, and Dividend
EBITDA excluding IFRS 16 impact for first quarter 2023 was $28.5 million, compared to $42.6 million in the first quarter of 2022.
Cash flow generated by operating activities, excluding IFRS 16, increased to $11.0 million for first quarter 2023, compared to cash flow used in operating activities of ($52.6) million in the first quarter of 2022. The significant year-over-year improvement in operating cash flow can be primarily attributed to the reduction in inventory levels.
Net financial debt at March 31, 2023 was $224.0 million, compared to $217.4 million at December 31, 2022, and $172.4 million at March 31, 2022. The year-over-year increase in net debt is primarily due to capital expenditures and dividend payments, partially offset by cash flow generated by operating activities.
Equity at March 31, 2023 was $703.1 million, up 8% from $651.7 million at March 31, 2022.
Delta Galil declared a dividend of $4 million, or $0.156 per share, to be distributed on June 6, 2023. The record and “ex-dividend” date will be May 24, 2023.
2023 Financial Guidance
The Company’s first quarter results were in line with its expectations and plan. Delta Galil now expects to meet the lower end of its prior 2023 guidance range. The Company’s guidance excludes non-core items, includes IFRS 16, and is based on exchange rates of 1.10 USD to 1 Euro and 3.55 NIS to 1 USD:
|
Full-Year 2023
|
|
2022
|
|
|
|
|
Sales |
$2,000.0 |
|
$2,031.5 |
|
|
|
|
EBIT |
$192.0 |
|
$190.2 |
EBITDA |
$285.7 |
|
$284.2 |
Net income |
$120.9 |
|
$120.6 |
Diluted EPS ($) |
$4.27 |
|
$4.33 |
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 are 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.
DELTA GALIL INDUSTRIES LTD. Concise Consolidated Balance Sheets As of March 31, 2023 |
|||||
|
March 31 |
|
December 31 |
||
|
2023 |
|
2022 |
|
2022 |
|
(Unaudited) |
|
(Audited) |
||
|
Thousands of Dollars |
||||
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
118,267 |
|
217,839 |
|
126,649 |
Restricted Cash |
2,916 |
|
5,392 |
|
4,002 |
Short-term deposits |
63,147 |
|
- |
|
64,265 |
Trade receivables |
194,875 |
|
188,401 |
|
236,772 |
Taxes on income receivable |
11,848 |
|
13,674 |
|
10,691 |
Others |
40,802 |
|
41,213 |
|
36,389 |
Financial derivative |
251 |
|
37 |
|
423 |
Inventory |
476,186 |
|
474,163 |
|
487,307 |
Total current assets |
908,292 |
|
940,719 |
|
966,498 |
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
Investments in associated companies accounted using |
|
|
|
|
|
the equity method and long-term receivables |
12,372 |
|
12,251 |
|
12,528 |
Investment property |
2,726 |
|
2,906 |
|
2,702 |
Fixed assets, net of accumulated depreciation |
236,436 |
|
217,578 |
|
235,273 |
Goodwill |
144,959 |
|
146,691 |
|
144,238 |
Intangible assets, net of accumulated amortization |
273,158 |
|
287,005 |
|
275,948 |
Assets in respect of usage rights |
199,457 |
|
210,618 |
|
193,275 |
Deferred tax assets |
24,939 |
|
18,520 |
|
18,183 |
Financial derivative |
1,114 |
|
11,810 |
|
2,025 |
Total non-current assets |
895,161 |
|
907,379 |
|
884,172 |
Total assets |
1,803,453 |
|
1,848,098 |
|
1,850,670 |
DELTA GALIL INDUSTRIES LTD. Concise Consolidated Balance Sheets As of March 31, 2023 |
||||||||
|
March 31 |
|
December 31 |
|||||
|
2023 |
|
|
2022 |
|
|
2022 |
|
|
(Unaudited) |
|
(Audited) |
|||||
|
Thousands of Dollars |
|||||||
Liabilities and Equity |
|
|
|
|
|
|||
Current liabilities: |
|
|
|
|
|
|||
Short-term bank loans |
67,219 |
|
|
16,308 |
|
|
51,430 |
|
Current maturities of bank loans |
45,441 |
|
|
7,377 |
|
|
42,152 |
|
Current maturities of debentures |
29,935 |
|
|
32,038 |
|
|
45,935 |
|
Financial derivative |
1,457 |
|
|
66 |
|
|
1,037 |
|
Current maturities of liabilities in respect of leases |
49,717 |
|
|
49,359 |
|
|
47,968 |
|
Trade payables |
189,469 |
|
|
259,439 |
|
|
209,673 |
|
Taxes on income payable |
33,155 |
|
|
27,520 |
|
|
34,048 |
|
Provision for restructuring plan |
3,715 |
|
|
4,810 |
|
|
2,633 |
|
Others |
148,372 |
|
|
154,945 |
|
|
176,411 |
|
Total current liabilities |
568,480 |
|
|
551,862 |
|
|
611,287 |
|
|
|
|
|
|
|
|||
Non-current liabilities: |
|
|
|
|
|
|||
Bank loans |
128,744 |
|
|
168,434 |
|
|
133,151 |
|
Severance pay liabilities less plan assets |
5,901 |
|
|
8,056 |
|
|
5,982 |
|
Liabilities in respect of leases |
170,377 |
|
|
179,687 |
|
|
164,175 |
|
Other non-current liabilities |
59,769 |
|
|
78,401 |
|
|
63,431 |
|
Debentures |
127,812 |
|
|
173,275 |
|
|
129,969 |
|
Deferred taxes liabilities |
36,611 |
|
|
36,672 |
|
|
32,158 |
|
Financial derivative |
2,642 |
|
|
- |
|
|
173 |
|
Total non-current liabilities |
531,856 |
|
|
644,525 |
|
|
529,039 |
|
Total liabilities |
1,100,336 |
|
|
1,196,387 |
|
|
1,140,326 |
|
|
|
|
|
|
|
|||
Equity: |
|
|
|
|
|
|||
Equity attributable to equity holders of the parent company: |
|
|
|
|
|
|||
Share capital |
23,714 |
|
|
23,714 |
|
|
23,714 |
|
Share premium |
128,070 |
|
|
128,772 |
|
|
128,268 |
|
Other capital reserves |
25,494 |
|
|
45,131 |
|
|
26,410 |
|
Retained earning |
512,316 |
|
|
440,816 |
|
|
517,751 |
|
Treasury shares |
(13,877 |
) |
|
(14,579 |
) |
|
(14,075 |
) |
|
675,717 |
|
|
623,854 |
|
|
682,068 |
|
Minority interests |
27,400 |
|
|
27,857 |
|
|
28,276 |
|
Total equity |
703,117 |
|
|
651,711 |
|
|
710,344 |
|
Total liabilities and equity |
1,803,453 |
|
|
1,848,098 |
|
|
1,850,670 |
|
DELTA GALIL INDUSTRIES LTD. Concise Consolidated Statement of Income For the 3-month period ending March 31, 2023 |
|||||
|
Three months ended March 31 |
||||
|
2023 |
|
|
2022 |
|
|
(Unaudited) |
||||
|
Thousands of Dollars |
||||
|
Except for Earning Per Share data |
||||
|
|
|
|
||
|
|
|
|
||
Sales |
442,457 |
|
|
483,873 |
|
Cost of sales |
269,546 |
|
|
300,581 |
|
Gross profit |
172,911 |
|
|
183,292 |
|
% of sales |
39.1 |
% |
|
37.9 |
% |
Selling and marketing expenses |
129,639 |
|
|
127,110 |
|
% of sales |
29.3 |
% |
|
26.3 |
% |
General and administrative expenses |
23,330 |
|
|
23,226 |
|
% of sales |
5.3 |
% |
|
4.8 |
% |
Other Expenses (income), net and |
|
|
|
||
Share in profits of associated company |
101 |
|
|
(1,238 |
) |
Operating income excluding non-core items |
19,841 |
|
|
34,194 |
|
% of sales |
4.5 |
% |
|
7.1 |
% |
Non-core items |
5,421 |
|
|
- |
|
Operating income |
14,420 |
|
|
34,194 |
|
Finance expenses, net |
10,582 |
|
|
9,672 |
|
Income before tax on income |
3,838 |
|
|
24,522 |
|
Taxes on income |
823 |
|
|
5,577 |
|
Net income for the period |
3,015 |
|
|
18,945 |
|
Net income for the period excluding non-core items, net of tax |
7,772 |
|
|
18,945 |
|
|
|
|
|
||
|
|
|
|
||
Attribution of net earnings for the period: |
|
|
|
||
Attributed to Company's shareholders |
2,117 |
|
|
17,748 |
|
Attributed to non-controlling interests |
898 |
|
|
1,197 |
|
|
3,015 |
|
|
18,945 |
|
|
|
|
|
||
Net diluted earnings per share
|
0.08 |
|
|
0.67 |
|
Net diluted earnings per share, before non-core items, net of tax, attributable to Company's shareholders |
0.26 |
|
|
0.67 |
|
|
|
|
|
||
|
|
||||
DELTA GALIL INDUSTRIES LTD. Concise Consolidated Cash Flow Reports For the 3-month period ending March 31, 2023 |
|||||
|
Three months ended March 31 |
||||
|
2023 |
|
|
2022 |
|
|
(Unaudited) |
||||
|
Thousands of Dollars |
||||
|
|
|
|
||
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
||
Net income for the period |
3,015 |
|
|
18,945 |
|
Adjustments required to reflect cash flows |
|
|
|
||
deriving from (used in) operating activities |
40,338 |
|
|
(45,174 |
) |
Interest paid in cash |
(12,431 |
) |
|
(7,485 |
) |
Interest received in cash |
1,099 |
|
|
91 |
|
Taxes on income paid in cash, net |
(8,253 |
) |
|
(6,234 |
) |
Net cash generated from (used in) operating activities |
23,768 |
|
|
(39,857 |
) |
Cash flows from investment activities: |
|
|
|
||
Short-term deposits |
(602 |
) |
|
- |
|
Purchase of fixed assets |
(5,228 |
) |
|
(7,720 |
) |
Purchase of intangible assets |
(1,276 |
) |
|
(1,368 |
) |
Proceeds from selling of fixed assets |
143 |
|
|
80 |
|
Others |
1,076 |
|
|
453 |
|
Net cash used in Investing activities |
(5,887 |
) |
|
(8,555 |
) |
Cash flows from financing activities: |
|
|
|
||
Dividends paid to non-controlling interest holders in consolidated subsidiary |
(996 |
) |
|
(1,545 |
) |
Long term payables credit related to fixed assets purchase |
(3,231 |
) |
|
(3,056 |
) |
Lease principle repayment |
(12,819 |
) |
|
(12,713 |
) |
Repayment of Debentures |
(15,140 |
) |
|
- |
|
Dividend paid |
(8,018 |
) |
|
(9,931 |
) |
Receipt of a long-term loans from banking corporations |
- |
|
|
53,800 |
|
Repayment of long-term loans from banking corporations |
(1,905 |
) |
|
(1,989 |
) |
Short-term credit from banking corporations, net |
15,737 |
|
|
16,359 |
|
Repayment of bank loan used to acquisition of a subsidiary |
- |
|
|
(399 |
) |
Others |
- |
|
|
(1,265 |
) |
Net cash generated from (used in) financing activities |
(26,372 |
) |
|
39,261 |
|
Net decrease in cash and cash equivalents |
(8,491 |
) |
|
(9,151 |
) |
|
|
|
|
||
Exchange rate differences and revaluation of cash |
|
|
|
||
and cash equivalents, net |
109 |
|
|
(3,139 |
) |
Balance of cash and cash equivalents |
|
|
|
||
at the beginning of the period, net |
126,649 |
|
|
230,129 |
|
Balance of cash and cash equivalents
|
118,267 |
|
|
217,839 |
|
DELTA GALIL INDUSTRIES LTD. Concise Consolidated Cash Flow Reports For the 3-month period ending March 31, 2023 |
|||||
|
Three months ended March 31 |
||||
|
2023 |
|
|
2022 |
|
|
(Unaudited) |
||||
|
Thousands of Dollars |
||||
Adjustments required to reflect cash flows |
|
|
|
||
From (used in) operating activities: |
|
|
|
||
Revenues and expenses not involving cash flow: |
|
|
|
||
Depreciation |
9,366 |
|
|
8,312 |
|
Amortization |
16,127 |
|
|
15,033 |
|
Exchange rate losses |
67 |
|
|
5 |
|
Interest paid in cash |
10,200 |
|
|
5,119 |
|
Interest received in cash |
(1,099 |
) |
|
(91 |
) |
Taxes on income paid in cash, net |
8,253 |
|
|
6,234 |
|
Deferred taxes on income, net |
(2,611 |
) |
|
(2,407 |
) |
Interest due to lease agreements |
2,231 |
|
|
2,366 |
|
Severance pay liability, net |
(449 |
) |
|
- |
|
Change in restructuring accrual |
874 |
|
|
(4,087 |
) |
Capital gain from sale of fixed assets |
(2 |
) |
|
(11 |
) |
Change to the benefit component of options granted to employees |
809 |
|
|
1,148 |
|
Credit gain from trade receivables |
(102 |
) |
|
(74 |
) |
Share in profits of associated company accounted for using the equity method |
(64 |
) |
|
(40 |
) |
Others |
4,218 |
|
|
1,568 |
|
|
47,818 |
|
|
33,075 |
|
Changes to operating assets and liabilities: |
|
|
|
||
Decrease in trade receivables |
39,034 |
|
|
12,092 |
|
Increase in other receivable |
(8,306 |
) |
|
(531 |
) |
Increase (decrease) in trade payables |
(22,213 |
) |
|
9,541 |
|
Increase in other payables |
(28,755 |
) |
|
(17,042 |
) |
Decrease (Increase) in inventory |
12,760 |
|
|
(82,309 |
) |
|
(7,480 |
) |
|
(78,249 |
) |
|
40,338 |
|
|
(45,174 |
) |
|
|
|
|
||
