Optimism over 44% earnings rise at Delta Galil dampened by coronavirus fears

By

Robin Driver

Published
Feb 27, 2020

Delta Galil Industries, Ltd., the Tel Aviv-based owner of brands including 7 For All Mankind, Schiesser, Eminence and PJ Salvage, announced record fourth-quarter and full-year sales and earnings on Wednesday thanks to strong top and bottom-line growth, but the coronavirus outbreak cast a long shadow over the company’s outlook for 2020.

 
In the fourth quarter ended December 31, 2019, Delta Galil’s net income skyrocketed 44% to $35.6 million, up from $24.7 million in the prior-year period, while diluted earnings per share rose 45% from $0.97 to $1.40.
 
Quarterly sales at the company totaled $504.8 million, an 11% increase from $454.3 million in the same period in the previous year.

Full-year sales also saw a low-double-digit increase of 13%, rising from $1.5 billion to $1.7 billion, while the company’s annual net income jumped 20%, from $48.2 million to $57.7 million. Diluted earnings per share rose 19% to $2.26, up from $1.90 in the previous year.
 
Delta Galil’s progress in 2019 was driven primarily by its global upper market, Delta Israel and European brands segments, as well as double-digit growth in its e-commerce channel, which reflected continued investments made by the company in its online platform over the course of the year.
 
As part of its online expansion strategy, Delta Galil recently acquired online bra-fitting specialist Brayola, after a year which also saw the company purchase Hong Kong-based vertically integrated intimates group Bogart, another key focus for Delta Galil’s expansion plans in 2020.
 
“We are pleased to have concluded a strong 2019, as reflected in our record sales, EBIT, EBITDA and operating cash flow,” commented Delta Galil CEO Isaac Dabah in a release. “As always, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value. And, with a strong balance sheet, we have the necessary financial resources to continue to innovate and grow.”
 
However, despite Dabah’s apparent optimism, the company’s full-year 2020 outlook disappointed investors due to the predicted negative impact of the ongoing coronavirus outbreak.
 
Estimating losses related to the epidemic to be between $5 million and $7 million in the first half of the year, Delta Galil currently predicts full-year net income of between $57 million and $62 million, with diluted EPS expected to be in the range of $2.23 to $2.42.
 
Full-year 2020 sales are expected to be between $1,740 million and $1,770 million, representing an increase in the range of 3% to 5% compared to 2019.

Following the company’s announcement of its 2020 outlook, shares in Delta Galil fell 9% during Wednesday’s trading session in Tel Aviv.