Delta Galil has reported a loss for the first quarter amid the news it expects the Covid-19 pandemic to lead to a more pronounced sales and profit decline for the second quarter.
The Israel-based manufacturer and marketer of branded and private label apparel reported a net loss of US$30.5m in the three months ended 31 March, compared to net income of $3m for the first quarter last year. Excluding non-recurring items net of tax, net loss was $20m.
Operating loss was $28.8m, compared to an operating income of $10.4m in the year-ago period.
Sales amounted to $332.7m, a 9% decline from $365.4m in the same quarter of last year. The decrease was mainly driven by a reduction in sales in all business segments and markets, partially offset by increased sales to certain customers, including $38.1m in sales attributable to the Bogart acquisition.
“Strong” double-digit growth was seen in e-commerce sales, including both own sites and internet customers.
Meanwhile, Delta Galil launched a comprehensive restructuring plan to further streamline operations that will be recorded as a one-time expense of $40m in the second quarter.
Among the actions taken to further strengthen financial flexibility were a company-wide hiring freeze, reduction in salaries of senior management, furlough and reduced working hours. The company also negotiated a reduction in rental costs, suspended its quarterly cash dividend for 2020, and drew down $66m from its committed credit facilities. It is also receiving government-supported loans in the amount of $30m the second quarter.
Delta Galil estimated its cash balance as of 24 June at approximately $220m as a result.
The firm said it will continue to take the necessary actions across its business to streamline its operations, optimise production capabilities and productivity, reduce overheads, and improve its competitive position going forward.
CEO Isaac Dabah said these are “truly unprecedented times”, where the business and first-quarter results have been significantly impacted by the Covid-19 pandemic.
“That said, we’ve seen a sustained increase in e-commerce sales in all of our operating segments, demonstrating the continued strength of our diversified business and omnichannel model. We had a very good improvement in our operating cash flow due to tight management of our working capital. And continuing the positive trend from last year, Delta Israel had significant improvement in profitability, despite Covid-19.
“In addition, we’ve launched a comprehensive restructuring plan, which covers all of our operating segments. As a result, and with a strong balance sheet in hand, we are well-positioned to emerge from this challenging period and continue our growth in a post-Covid world.”
Delta Galil did not provide financial guidance for fiscal 2020 but said it expects its second-quarter sales and profit decline to be more significant than that of the first quarter due to the prolonged shutdown of stores in its main markets.
The company does, however, anticipate a “much stronger and profitable” second-half of the year with a gradual return to normal operations.