Delta Galil Industries Ltd. reported a profit against a loss in the second quarter ended June 30. Revenues for the Israeli-based maker of underwear, leisurewear and activewear jumped 68 percent.

Second Quarter 2021 Highlights

  • Sales were $455.8 million, a 68 percent increase from $270.9 million last year, with strong growth across all business segments. Organic sales, excluding Bare Necessities, which was acquired in October of last year, increased by 56 percent in the second quarter.
    company’s own websites’ sales increased 97 percent to $63.3 million.
  • Gross margin increased by 1,180 basis points to an all-time high of 41.1 percent.
  • Operating margin increased to a record Q2 level of 9.3 percent, versus negative 6.0 percent in Q2 2020.
  • Net income was $27.3 million, compared to a net loss of $53.3 million for the second quarter of 2020.
  • Q2 earnings per share rose to $0.97 for the second quarter of 2021 compared to a loss per share of $2.08 in the second quarter of 2020.
  • Operating cash flow excluding IFRS 16 was $36.9 million compared to $65.9 million in the second quarter of 2020.
  • Strong balance sheet highlighted by $279.9 million in cash and $585.2 million in equity as of June 30, 2021.
  • Net financial debt was at its lowest level since June 2016, at $124.6 million.
  • The company increased its dividend to $5.0 million, or $0.196 per share, to be distributed on August 26, 2021. The determining and “ex-dividend” date will be August 18, 2021.

Isaac Dabah, CEO, Delta Galil, said: “We are very pleased with our performance this quarter, which now marks four consecutive quarters of record operating margin and three consecutive quarters of record gross margin, including achieving the highest ever gross margin of 41.1 percent in this quarter. We saw a significant increase in EBIT this past quarter, which was driven by higher sales in all segments and better channel, product and customer mix, along with SG&A leverage and improvements in our factories, which were positively impacted by efficiency measures we implemented. It is also important to note that total sales were up 22 percent and net profit was more than four times higher than in the same quarter of 2019, the last ‘normal’ period before the pandemic impacted the global economy. We remain focused on our commitment to digital innovation and recently announced the strategic merger of our Bare Necessities and Brayola business units to create the largest intimates marketplace for women. We also recently signed new global license agreements with Adidas and Wolford, and we are excited by the growth opportunities ahead of us. Our operating cash flow continues to be strong, enabling us to reduce our debt to the lowest level in the last five years. With our strong balance sheet, we have the necessary resources to deliver continued innovation and growth.”

Sales
The company reported sales of $455.8 million for the second quarter of 2021, a 68 percent increase from $270.9 million for the second quarter of 2020. Sales for the first six months of 2021 were $871.9 million, up 44 percent from $603.6 million in the comparable period last year. Excluding the sales of Bare Necessities, which was acquired in October 2020, sales increased by 56 percent and 35 percent in the second quarter and the first half of the year, respectively, compared to the same periods last year. Effective as of the second quarter of 2021, Delta Galil reorganized its business segments to better reflect and align with its strategic focus. The new segments, Brands (owned and licensed), Private Label, Delta Israel, 7 for All Mankind, and Online Retailer, all contributed to its recent sales growth. Growth also was seen across all geographic regions.

Digital Sales
E-commerce sales on the company’s own website for the second quarter and first six months of 2021 rose 97 percent and 162 percent to $63.3 million and $134.1 million, respectively, compared to comparable periods in 2020. Excluding Bare Necessities, e-commerce own website sales declined 5 percent in the second quarter of 2021 compared to the same quarter in 2020 but increased 46 percent in the first half of the year compared to the same period last year.

EBIT
EBIT for the second quarter increased $97.8 million to $42.4 million, compared to a negative $55.4 million in the second quarter of 2020. Before non-core items, EBIT increased $58.7 million to $42.4 million from negative $16.2 million in the second quarter of 2020.

EBIT for the first six months of 2021 increased to $70.4 million, compared to a negative EBIT of $84.1 million for the first six months of 2020. Excluding non-core items, EBIT for the first six months of 2021 was $70.4 million, compared to a negative EBIT of $32.1 million for the same period last year.

Net Income
Net income for the second quarter was $27.3 million, compared to a net loss of $53.3 million for the second quarter of 2020. Excluding non-core items, net of tax, net income for the second quarter was $27.3 million, compared to a net loss of $23.0 million for the second quarter of 2020.

Net income for the first six months of 2021 was $42.4 million, compared to a net loss of $83.8 million for the same period last year. Excluding non-core items, net of tax, net income for the first six months of 2021 was $42.4 million, compared to a net loss of $43.0 million for the same period last year.

Diluted Earnings Per Share
Diluted earnings per share rose to $0.97 for the second quarter of 2021, compared to a loss per share of $2.08 in the second quarter of 2020. Diluted earnings per share before non-core items amounted to $0.97 for the second quarter, compared to a loss per share of $0.89 for the second quarter of 2020.

Diluted earnings per share for the first six months of 2021 were $1.54, compared to a diluted loss per share of $3.27 for the same period of 2020. Diluted earnings per share excluding non-core items were $1.54 for the first six months of 2021, compared to a loss per share of $1.67 for the comparable period last year.

EBITDA, Cash Flow, Net Debt, Equity, and Dividend
EBITDA was $66.9 million in the second quarter of 2021, compared to $6.7 million in the second quarter of 2020. For the first six months of 2021, EBITDA was $119.7 million, compared to $14.2 million in the same period last year.

Operating cash flow for the second quarter of 2021 was $50.3 million, compared with $78.5 million in the second quarter of 2020. Excluding IFRS 16, operating cash flow was $36.9 million, compared to $65.9 million in the second quarter of 2020. Excluding the second quarter of 2020, the second quarter of 2021 represented the company’s highest cash flow from operations.

Operating cash flow totaled $81.6 million for the first six months of 2021, compared to $83.3 million for the first six months last year. Excluding IFRS 16, operating cash flow was $58.3 million for the first six months of 2021, compared to $58.1 million for the same period last year.

Net financial debt as of June 30, 2021, was $124.6 million, its lowest level since June 2016. This compared to $150.2 million as of March 31, 2021, $236.3 million as of December 31, 2020, and $306.6 million as of June 30, 2020.

In order to flatten the debt payment curve and extend the duration of the loan embedded in the bonds series, the company will make full redemption of its debentures series B on August 23, 2021, in a total amount of approximately $115 million, using bank term loans and available cash.

Equity on June 30, 2021, was $585.2 million or 33.2 percent from the total balance sheet, compared to $410.4 million or 25.5 percent from the total balance sheet a year earlier.

Delta Galil increased its dividend to $5.0 million, or $0.196 per share, to be distributed on August 26, 2021. The determining and “ex-dividend” date will be August 18, 2021.

2021 Financial Guidance
Delta Galil raised its 2021 financial guidance, excluding non-core items and based on IFRS 16 and current market conditions and assuming there is no resurgence of the COVID-19 pandemic that leads to quarantines and/or lockdowns in any countries in which the company sells or manufactures its products:

  • Full-year 2021 sales are expected to range between $1,825 million and $1,875 million, representing an increase of 3 percent compared to prior guidance and up 8 percent to 11 percent from 2019 actual sales of $1,690.2 million.
  • Full-year 2021 EBIT is expected to range between $160 million and $170 million, representing an increase of 14 percent compared to prior guidance and up 51 percent to 60 percent from 2019 actual EBIT of $106.0 million.
  • Full-year 2021 EBITDA is expected to range between $260 million and $270 million, representing an increase of 8 percent compared to prior guidance and up 33 percent to 38 percent from 2019 actual EBITDA of $195.6 million.
  • Full-year 2021 net income is expected to range between $96 million and $104 million, representing an increase of 17 percent compared to prior guidance and up 59 percent to 73 percent from 2019 actual net income of $60.2 million.
  • Full-year 2021 diluted EPS is expected to range between $3.40 and $3.70, representing an increase of 15 percent compared to prior guidance and up 44 percent to 57 percent from 2019 actual EPS of $2.36.

Photo courtesy Delta Galil