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August 16, 2022

Delta Galil in record Q2 as sales hit $491.3m

Israel-based apparel manufacturer Delta Galil has reported record financial results for the second quarter, with sales surpassing US$491m.

By Beth Wright

Reporting its results for the three-month period to 30 June, Delta Galil said sales reached record levels for the sixth consecutive quarter, increasing 8%, or 11% in constant dollars, to US$491.3m from $455.8m last year. Record second-quarter sales were driven primarily by strong growth within the company’s Private Label segment.

First-half sales also hit a record of $975.1m, a 12% increase from $871.9m in the prior-year period. In constant dollars, first-half sales increased 14%.

Own website sales in the second quarter of 2022 declined 15% to $53.7m from $63.4m in the prior-year period, following a shift in consumer behaviour back to physical retail locations as stores reopened after Covid-19 related lockdowns.

Excluding Bare Necessities, which was acquired in October 2020, own website sales in the second quarter increased by 93% compared to the same period in 2019.

Net income excluding non-recurring items in the second quarter of 2022 increased 3% to $28.1m from $27.3m a year earlier.

Gross margin narrowed to 38.5% from 41.1% last year, attributable mainly to increased freight and raw material costs, the increased mix of private label sales, which are characterised by lower gross margins but higher operating margins, and the devaluation of the Euro compared to the US dollar, partially offset by a favourable customer mix, and increased profitability of the company’s factories. 

Isaac Dabah, CEO of Delta Galil, said: “Positive momentum continued across many aspects of our business and we produced record second quarter and year-to-date financial results. Our record results reflect the powerful and diversified platform we have built, our innovative products, compelling brands, broad customer base and the successful execution of our growth strategy.

“We believe we are well positioned to successfully navigate the challenging retail environment while pursuing our long-term growth initiatives. In July 2022, as part of our global strategy to grow our digital presence and increase our focus on sustainable apparel and brands, we acquired Organic Basics, a digitally-native brand known for its sustainably and ethically made underwear, activewear and base layers. We see a significant opportunity to grow the Organic Basics brand globally, particularly in the US and Europe, and we are excited to launch an expanded collection of products in 2023. We are confident that our diversified business model, strong balance sheet and global workforce will position us to meet our targets, and we expect 2022 to be a record year for sales and profitability.”

Looking ahead, Delta Galil reiterates its guidance on a constant currency basis and expects to achieve the mid-to-low range of its sales guidance which forecasts an increase of 7-8% on sales of $1.95bn last year to between $2.08-$2.11bn.

The company said rapid changes in currency exchange rates have impacted its reported sales. On a constant currency basis, full-year 2022 sales would benefit from additional sales of $45m or 2%.

Net income for the full year is forecast at between $138-$145m, representing an increase of 11-17% compared to 2021 net income of $124.2m.

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