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Delta Galil Reports Fourth Quarter and Full Year 2023 Results

Sunday, February 25, 2024 11:06 PM | Business Wire via QuoteMedia

Delta Galil Reports Fourth Quarter and Full Year 2023 Results

DTC Sales Increased Across All Segments in 2023, Demonstrating the Strength of Delta’s Brands

2023 Full Year Gross Margin Increased to an Annual Record of 40.9%

2023 Operating Cash Flow Excluding IFRS 16 Was an Annual Record of $181.9 Million

The Company Reduced Inventory By $125.9 Million in 2023

Gross Margin Increased to a Fourth Quarter Record of 43.1%

Strong EBIT for the Fourth Quarter of 11.0% of Sales, a 50 Basis Point Year-Over-Year Increase

Achieved 2023 Updated Financial Goals Despite a Challenging Sales Environment

Declares a $9 Million Dividend for Fourth Quarter 2023

Based on Management’s 2024 Plan, the Company is Focused on Achieving High Single-Digit Sales and Double-Digit Profitability Growth Compared to 2023

Delta Galil Industries, Ltd. (DELG/Tel Aviv Stock Exchange), the global manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim apparel for ladies, men, and children, today reported financial results for the fourth quarter and year ended December 31, 2023.

  • Fourth quarter sales decreased 7% (6% in constant currency) to $508.6 million, driven by the continued slowdown in global consumer spending
  • Full year sales decreased 9% (8% in constant currency) to $1,857.7 million
  • Fourth quarter online sales of the Company’s own brands increased 16%
  • Full year online sales of the Company’s own brands increased 17%
  • Gross margin improved 340 basis points to a fourth quarter all-time record of 43.1%
  • Full year gross margin improved 230 basis points to an annual record of 40.9%
  • Fourth quarter EBIT before non-core items was $56.2 million, or 11.0% of sales compared to $56.9 million, or 10.5% of sales, for the same period last year
  • Full year EBIT before non-core items was $153.0 million, or 8.2% of sales
  • Full year operating cash flow excluding IFRS 16 improved $201.2 million to an annual record $181.9 million
  • Net debt, excluding IFRS 16, at its lowest level since December 2021, declined 43% to $123.4 million, compared to $217.4 million at December 31, 2022
  • Strong Balance sheet with $174.5 million in cash and record shareholders’ equity of $768.4 million at December 31, 2023
  • Declares a $9 million dividend for fourth quarter 2023, compared to $8 million for the fourth quarter last year

Isaac Dabah, CEO of Delta Galil, stated, “I am proud of our 2023 results, as our global teams successfully navigated a challenging retail environment. Sales in our DTC channel grew across all reporting segments, demonstrating the strength of our brands. Throughout the year, we also pursued strategies aimed at expanding gross margin, reducing our inventory levels, and generating strong operating cash flow. Our performance in 2023 resulted in record annual gross margin, a 26% year-over-year reduction in inventory, record annual operating cash flow, and a significant reduction in net debt.”

Mr. Dabah continued, “Throughout 2023, we also made strategic investments to drive long-term growth opportunities. During the year we developed new innovative products for our global customers, added Florence by Mills to our rich brand portfolio, and acquired the Passionata brand. In addition, we focused on enhancing profitability by improving efficiencies and realigning our manufacturing capabilities. The actions we took during 2023 have added significant value to our business as we invested in growth, strengthened our financial position and created a more agile organization that is better positioned to compete in an increasingly complex retail and economic environment.”

Mr. Dabah concluded, “We expect the macro environment to remain challenging in 2024, but we believe we are well positioned to achieve year-over-year growth in revenue and profitability driven by the strength of our brands, our advanced manufacturing and design capabilities, and our strong balance sheet and financial position. I am encouraged by the powerful platform we have created and the long-term strategies we are pursuing to create sustainable value for our shareholders.”

Sales

The Company reported fourth quarter 2023 sales of $508.6 million, a 7% decrease (or 6% in constant currency) from $544.4 million in the fourth quarter of 2022. Sales for the 2023 full year were $1,857.7 million, a 9% decrease (8% in constant currency) from $2,031.5 million in the prior-year period.

Gross Margin

Gross margin in the fourth quarter of 2023 increased to a fourth quarter all-time record of 43.1%, compared to 39.7% in the fourth quarter of 2022. The 340-basis point expansion was due primarily to a better customer and segment mix, a higher portion of sales to Direct-to-Customers (DTC), improved profitability of our factories and lower freight cost, partially offset by higher discounts and promotions. Gross margin for the full year 2023 increased by 230 basis points to an annual record of 40.9%, compared to 38.6% in the prior-year period.

EBIT

EBIT in the fourth quarter of 2023 was $56.2 million or 11.0% of sales compared to $57.2 million or 10.5% of sales in the prior-year period.

EBIT for the full year 2023 was $144.9 million, compared to $185.1 million in the same period last year. In the full year 2023, EBIT before non-core items was $153.0 million, or 8.2% of sales, compared to $190.2 million, or 9.4% of sales, in the full year 2022.

The reduction in EBIT margin before non-core items was mainly due to lower sales and higher SG&A expenses, partially offset by higher gross margin.

Non-Core Items

The Company recorded no non-core items in its fourth quarter of 2023.

For the full year of 2023, expenses associated with the Company’s previously disclosed realignment plans were $11.4 million. The Company estimates annual cost savings from its 2023 realignment plans to reach approximately $11.5 million in 2024, after experiencing a slight benefit to costs in 2023.

Non-Core Items

(in USD, Millions)

12 Months

2022

2023

Realignment plans

$

5.5

$

11.4

Income from decrease of earn-out liability

(9.6)

(4.0)

Impairment of non-financial assets

9.3

-

Deal costs

-

0.7

Total Non-Core Items

$

5.2

$

8.1

Net Income

Net income in the fourth quarter of 2023 was $37.8 million, compared to $37.7 million in the fourth quarter last year. Net income, excluding non-core items, net of tax, was $37.8 million, compared to $37.4 million in the fourth quarter of 2022.

Net income for the full year 2023 was $85.3 million, compared to $115.4 million in the same period last year. Net income, excluding non-core items, net of tax, was $91.6 million, compared to $120.6 million in the 12 months ended 2022.

Diluted Earnings Per Share

Diluted earnings per share in the fourth quarter of 2023 were $1.31, compared to $1.35 in the fourth quarter of 2022. Diluted earnings per share, excluding non-core items, net of tax, were $1.31 compared to $1.34 in the fourth quarter of 2022.

Diluted earnings per share for the full year 2023 were $3.02, compared to $4.14 in the same period last year. Diluted earnings per share, excluding non-core items, net of tax, were $3.25 compared to $4.33 in 2022.

EBITDA, Cash Flow, Net Debt, Equity, and Dividend

EBITDA excluding IFRS 16 impact in the fourth quarter of 2023 was $62.9 million, compared to $65.6 million in the fourth quarter of 2022. In the 12 months ended December 31, 2023, EBITDA excluding IFRS 16 impact was $182.6 million, compared to $224.2 million in the 12 months ended December 31, 2022.

Cash flow generated from operating activities, excluding IFRS 16, was $82.3 million in the fourth quarter of 2023, compared to cash flow generated from operating activities of $85.1 million in the fourth quarter of 2022. Cash flow generated from operating activities, excluding IFRS 16, increased to a record $181.9 million for the full year 2023, compared to cash flow used in operating activities of $19.3 million for the full year 2022. The significant year-over-year improvement in operating cash flow is primarily attributed to the reduction in working capital and especially in inventory levels due to tight management and sale of old stock.

Net financial debt, excluding IFRS 16, at December 31, 2023, was $123.4 million, compared to $217.4 million at December 31, 2022. The year-over-year reduction in net debt is primarily due to the strong operating cash flow, partially offset by capital expenditure and dividend payments.

Equity on December 31, 2023 was at a record level of $768.4 million, up 8.2% from $710.3 million on December 31, 2022.

Delta Galil declared a dividend of $9 million, or $0.35 per share, which will be distributed on March 18, 2024. The record and “ex-dividend” date will be March 5, 2024.

202 4 Financial Guidance

The Company’s guidance excludes non-core items, including IFRS 16, is based on ex-rates of $1.05 to 1 Euro and NIS 3.74 to 1$, and is based on current tax rates, which are prior to the adoption of the new Pillar 2 tax legislation. These forward-looking statements are based largely on the expectations of the Company and are subject to uncertainties including macroeconomic trends. Actual results may differ materially from those included in the guidance as result of risks and uncertainties which cannot be fully predicted. There is no certainty that the aforementioned conditions will occur, and actual results may be significantly different from those forecasted or implied below.

Full Year 2024

Guidance

(in millions, except per

share amount)

2023

Results

(in millions, except per

share amount)

Sales

$1,951.0 – 2,031.0

$1,857.7

EBIT

$163.0 – 183.0

$153.0

EBITDA

$256.3 – 276.3

$246.8

Net income

$99.1 – 114.7

$91.6

Diluted EPS ($)

$3.52 – 4.11

$3.25

Based on the Company's order book and projections, the Company expects growth in 2024 to materialize mostly in the second half of the year.

The Company's expectations depend, among others, on the following: returning to normalized inventory levels at our main customers driving higher demand and improving profitability, expanding into new categories with Skims, launching Organic Basics new global collection, increasing production levels in our new factories in Vietnam and Egypt, implementing realignment plans including a new plan for Bare Necessities in the first quarter of 2024, improving backlog of innovative products and launching new brands and license agreements.

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with IFRS accounting principles (“GAAP”), which include translation and transactional impacts from foreign currency exchange rates. The release also refers to “constant dollar” amounts, which exclude the impact of translating foreign currencies into U.S. dollars, and are considered a non-GAAP financial measure. These constant currency performance measures should be viewed in addition to, and not in lieu of, or superior to, Delta Galil’s operating performance measures calculated in accordance with GAAP.

About Delta Galil Industries

Delta Galil Industries is a global manufacturer and marketer of branded and private label apparel products for men, women and children. Since its inception in 1975, the Company has continually endeavored to create products that follow a body-before-fabric philosophy, placing equal emphasis on comfort, aesthetics and quality. Delta Galil develops innovative seamless apparel including bras, shapewear and socks; intimate apparel for women; underwear for men including under its owned brands Schiesser, Eminence, and Athena; babywear, activewear, sleepwear, and loungewear including under its owned P.J. Salvage and Delta brands. Delta Galil also designs, develops markets and sells branded denim and apparel under the brand 7 For All Mankind®, and ladies’ and kids’ apparel under the brand Splendid®. In addition, it sells its products under brand names licensed to the company, including adidas, Wolford, Wilson, Columbia, Tommy Hilfiger and others. For more information, visit www.deltagalil.com .

Safe Harbor Statement

Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may" "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein, and while expected, there is no guarantee that we will attain the aforementioned anticipated developmental milestones. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, tax rates in the various countries the company operates in, competitive and other factors affecting the Company and its operations, markets, product, and distributor performance, the impact on the national and local economies resulting from terrorist actions, and U.S. actions subsequently; and other factors detailed in reports filed by the Company.

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of December 31, 2023

December 31

2023

2022

(Audited)

Thousands of Dollars

Assets

Current assets:

Cash and cash equivalents

174,463

126,649

Restricted Cash

2,950

4,002

Short-term deposits

-

64,265

Trade receivables

241,216

236,772

Taxes on income receivable

77

10,691

Other accounts receivable

48,920

36,389

Financial derivative

228

423

Inventory

361,416

487,307

Asset held for sale

1,773

-

Total current assets

831,043

966,498

Non-current assets:

Investments in associated companies accounted using the equity method and long-term receivables

14,897

12,528

Investment property

2,679

2,702

Fixed assets, net of accumulated depreciation

250,343

235,273

Goodwill

145,577

144,238

Intangible assets, net of accumulated amortization

277,952

275,948

Assets in respect of usage rights

237,177

193,275

Deferred tax assets

28,016

18,183

Financial derivative

903

2,025

Total non-current assets

957,544

884,172

Total assets

1,788,587

1,850,670

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of December 31, 2023

December 31

2023

2022

(Audited)

Thousands of Dollars

Liabilities and Equity

Current liabilities:

Short-term bank loans

822

51,430

Current maturities of bank loans

24,105

42,152

Current maturities of debentures

29,597

45,935

Financial derivative

1,380

1,037

Current maturities of leases liabilities

52,583

47,968

Trade payables

168,637

209,673

Taxes on income payable

35,182

34,048

Provision for restructuring plan

3,574

2,633

Other accounts payable

165,791

176,411

Total current liabilities

481,671

611,287

Non-current liabilities:

Bank loans

140,790

133,151

Severance pay liabilities, net

5,327

5,982

Liabilities in respect of leases

204,746

164,175

Other non-current liabilities

53,241

63,431

Debentures

96,496

129,969

Deferred taxes liabilities

35,812

32,158

Financial derivative

2,122

173

Total non-current liabilities

538,534

529,039

Total liabilities

1,020,205

1,140,326

Equity:

Equity attributable to equity holders of the parent company:

Share capital

23,714

23,714

Share premium

127,861

128,268

Other capital reserves

28,133

26,410

Retained earning

571,846

517,751

Treasury shares

(13,668)

(14,075)

737,886

682,068

Minority interests

30,496

28,276

Total equity

768,382

710,344

Total liabilities and equity

1,788,587

1,850,670

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the three months and year ending December 31, 2023

Year ended December 31

%

Increase/(Decrease)

Three months ended

December 31

%

Increase/(Decrease)

2023

2022

2023

2022

Thousands of Dollars

Except for Earnings per Share Data

Sales

1,857,682

2,031,541

(9%)

508,603

544,415

(7%)

Cost of sales

1,097,084

1,246,354

289,468

328,096

Gross profit

760,598

785,187

(3%)

219,135

216,319

1%

% of sales

40.9 %

38.6 %

43.1 %

39.7 %

Selling and marketing expenses

522,214

515,035

1%

141,364

137,119

3%

% of sales

28.1 %

25.4 %

27.8 %

25.2 %

General and administrative expenses

93,334

86,695

8%

25,048

20,557

22%

% of sales

5.0 %

4.3 %

4.9 %

3.8 %

Other expenses (income), net and share in profits of associated company accounted for using the equity method

(7,970)

(6,782)

(3,433)

1,716

Operating income excluding non-core items

153,020

190,239

(20%)

56,156

56,927

(1%)

% of sales

8.2 %

9.4 %

11.0 %

10.5 %

Non-core items, net

8,087

5,188

-

(279)

Operating income

144,933

185,051

56,156

57,206

Finance expenses, net

37,932

37,271

8,635

9,769

Income before tax on income

107,001

147,780

47,521

47,437

Taxes on income

21,660

32,402

9,741

9,771

Net income for the period

85,341

115,378

37,780

37,666

Net income for the period excluding non-core items, net of tax

91,600

120,566

(24%)

37,780

37,387

1%

Attribution of net earnings for the period:

Attributed to company's shareholders

79,210

109,476

34,366

35,531

Attributed to non-controlling interests

6,131

5,902

3,414

2,135

85,341

115,378

37,780

37,666

Net diluted earnings per share attributed to company's Shareholders

3.02

4.14

1.31

1.35

Net diluted earnings per share, before non-core items, net of tax attributable to Company's shareholders

3.25

4.33

(25%)

1.31

1.34

(2%)

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

Year ended

December 31

2023

2022

(Audited)

Thousands of Dollars

Cash flows from operating activities:

Net income for the period

85,341

115,378

Adjustments required to reflect cash flows deriving from operating activities

185,301

(40,403)

Interest paid in cash

(31,184)

(26,850)

Interest received in cash

4,014

425

Taxes on income paid in cash, net

(12,658)

(17,017)

Net cash generated from operating activities

230,814

31,533

Cash flows from investment activities:

Change in short-term deposits, net

60,422

(64,265)

Purchase of fixed assets

(45,363)

(47,992)

Purchase of intangible assets

(7,624)

(7,661)

Providing a loan to a business partner

(1,089)

-

Acquisition of activity

-

(4,500)

Proceeds from selling of fixed asset

1,121

6,538

Others

1,083

1,843

Net cash used in Investing activities

8,550

(116,037)

Cash flows from financing activities:

Dividends paid to non-controlling interest holders in consolidated subsidiary

(2,362)

(3,356)

Long term payables credit for fixed assets purchases

(6,684)

(5,628)

Lease principle repayments

(48,891)

(50,852)

Repayment of Debentures

(46,255)

(16,700)

Dividend paid

(26,510)

(28,009)

Receipt of long-term loans from banking corporations

32,694

60,397

Repayment of long-term loans from banking corporations

(44,457)

(7,223)

Short-term credit from banking corporations, net

(50,663)

51,430

Repayment of bank loan used to acquisition of a subsidiary

-

(792)

Others

(1,383)

(6,102)

Net cash used in financing activities

(194,511)

(6,835)

Net decrease in cash and cash equivalents

44,853

(91,339)

Exchange rate differences and revaluation of cash and cash equivalents, net

2,961

(12,141)

Balance of cash and cash equivalents less bank overdraft at the beginning of the period, net

126,649

230,129

Balance of cash and cash equivalents less bank overdraft at the end of the Period, net

174,463

126,649

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

Year ended

December 31

2023

2022

(Audited)

Thousands of Dollars

Adjustments required to reflect cash flows from operating activities:

Revenues and expenses not involving cash flow:

Depreciation

34,033

32,648

Amortization

61,961

61,362

Impairment of non-financial assets

-

8,122

Exchange rate (gains) losses

(124)

532

Interest paid in cash

21,933

19,169

Interest received in cash

(4,014)

(425)

Taxes on income paid in cash, net

12,658

17,017

Deferred taxes on income, net

(7,089)

(6,975)

Interest due to lease agreements

9,251

7,681

Severance pay liability, net

(1,599)

176

Change in restructuring accrual

941

(6,246)

Income from decrease of earn-out liability

(4,000)

(9,621)

Capital gain from sale of fixed assets

(1,482)

(4,435)

Change to the benefit component of options granted to employees

2,128

3,074

Impairment loss (gain) on trade receivables

1,006

(1,184)

Share in profits of associated company accounted for using the equity method

(846)

(666)

Others

1,457

163

126,214

120,392

Changes to operating assets and liabilities:

Increase in trade receivables

(3,868)

(40,189)

Increase in other receivables

(5,083)

(2,075)

Decrease in trade payables

(46,251)

(36,601)

Increase (Decrease) in other payables

(15,274)

22,314

Decrease (Increase) in inventory

129,563

(104,244)

59,087

(160,795)

185,301

(40,403)

For more information :
Nissim Douek
+972-54-5201178
Nissim@unik.co.il

U.S. Media Contact :
Stacy Berns
Berns Communications Group
+1-212-994-4660
sberns@bcg-pr.com

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