Delta Galil said the pandemic’s effects on the company were more impactful in the second quarter due to the store closures enacted in its markets

Delta Galil said the pandemic’s effects on the company were more impactful in the second quarter due to the store closures enacted in its markets

Delta Galil has reported a net loss for the second quarter as sales fell by more than 20% – but the Israeli apparel major expects to return to profit over the next three months.

The manufacturer and marketer of branded and private label apparel said the impact of Covid-19 reduced second-quarter sales and EBIT by about US$147m and $37m, respectively, due to store closures in key markets.

The company swung to a net loss of $53.3m for the three months ended 30 June, compared to net income of $5.1m in the second quarter last year. Excluding one-time items, net loss was $23m.

Operating loss was $55.4m, compared to operating profit of $14.3m last year, and included a one-time restructuring charge of $39.2m as part of plans to improve production flexibility and cost structure and reduce overhead. Benefits are expected to become evident in the third quarter of this year. Excluding non-recurring items, operating loss was $16.2m.

Sales, meanwhile, tumbled 27% to $270.9m from $373.9m in the prior-year period. Delta Galil said the decline was primarily due to reduced volume in most business segments and markets following the outbreak of Covid-19, partly offset by sales from The Bogart Group, which it acquired in June of last year. E-commerce sales surged by 163%.

"While our second-quarter results reflect the continued global impact of the Covid-19 pandemic, we are pleased to report that our financials were better than we expected as of last quarter," said Isaac Dabah, CEO of Delta Galil. "We finished Q2 with strong performance in direct-to-consumer e-commerce across all of our businesses, and we see strong recovery in brick-and-mortar sales in Israel, that presented a growth in May and June, and in our European brands.

"During the quarter, we initiated a significant strategic restructuring plan across all business units, which we expect to deliver efficiencies in our cost structure, operations and productivity starting already in Q3. We have a solid plan in place, a strong balance sheet, many of our customers are gradually recovering, and we continue to focus on developing new products to drive sustainable profitable growth and long-term shareholder value. We started the third quarter with strong results for July and expect to get back to profitability in the third quarter. "