Delta Galil Reports Fourth Quarter and Full Year 2023 Results

CAESAREA, Israel--(BUSINESS WIRE)--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.

2024 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)

Contacts

For more information:
Nissim Douek
[phone]
[e-mail]

U.S. Media Contact:
Stacy Berns
Berns Communications Group
[phone]
[e-mail]