Outlined in its latest financial update for the first quarter ended 31 March, Delta Galil said the company is focused on improving its “production flexibility, capabilities and competitiveness”, and has approved a new restructuring plan.
The plan involves shutting down its Bare Necessities distribution centre and transitioning to a third-party fulfillment centre in Mexico, relocating its Egypt cut and sew operations from Cairo to El-Minya, and shutting down its sock production facility in Bulgaria, moving production to a new facility in Egypt.
Efficiency measures are also expected to be implemented in the company’s 7 for All Mankind segment. Delta did not detail if any, or how many, jobs would be cut as a result of the new measures, although reports suggest 350 workers could be affected by the closure of the sock facility.
The total cost of the plan is estimated at around $5.5m, with the company estimating annual savings of around $7m, a portion of which will be realised this year.
First-quarter in-line with expectations
Delta Galil announced the restructuring alongside its first-quarter results, which revealed a slump in earnings from $18.9m last year to $3m. The company said 2023 annual results are expected to meet the lower end of its guidance range.
Sales were down 9% to $442.5m, while gross margin improved 120 basis points to reach 39.1% thanks to lower freight costs, which Delta described as a first-quarter record. EBITDA decreased 33% to $28.5m.
Delta said the results were in-line with company expectations. During the quarter the company increased direct-to-consumer sales across its websites and stores, while reducing inventory for the second consecutive quarter.
“We believe these positive trends demonstrate the strength of our brands and customers, and the resiliency of our business model,” said CEO Isaac Dabah. “We continue to focus on further streamlining our operations, strengthening our supply chain, and expanding our product portfolio to meet evolving consumer demands.
“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.”