(Filed Under Financial and General Interest News). Delta Galil Q2 net income fell to $15.050 million on lower sales of $443.6 million, compared to earnings of $22.661 million on sales of $491.3 million in the three months ended June 30, 2022.
The company said the sales decline of “10% (9% in constant currency)” was “driven by the macro slowdown in global consumer spending,” adding that “management expects to end 2023 with meaningfully higher gross and operating margins, lower inventory and reduced debt.”
For the full year the company is projecting net income of $120.9 million on sales of $2.000 billion compared to actual 2022 earnings of $120.6 million on sales of $2.0315 billion.
CEO Isaac Dabah explained, “As the global apparel industry navigates a period of normalizing trends, we are pursuing strategic actions aimed at reducing inventory levels, enhancing gross margin, and optimizing our production capabilities. Additionally, we are focused on growing our direct-to-consumer channels, while simultaneously developing new and innovative products for our customers. During the quarter, most of our owned brands increased direct sales across both e-commerce and brick and mortar retail channels.”
“Additionally, we managed to achieve a strong second quarter gross margin despite a heavily promotional retail landscape, while simultaneously reducing our inventory for the third consecutive quarter, netting a cumulative reduction of $85.7 since September 2022. These factors drove a $74.1 million improvement in operating cash flow compared to the prior year period, further strengthening our balance sheet. Finally, we announced another measure to streamline our operations by reducing our operational footprint in China.”
“As we enter the second half of 2023, we remain confident in the direction we are headed and in the meaningful opportunities we are pursuing to drive shareholder value. For the remainder of 2023, we expect sales and profitability growth led by strong direct-to-consumer performance, favorable customer mix, improving margins, and higher utilization across our factories. We expect to meet our prior 2023 full-year guidance while further strengthening our balance sheet through continued reductions in both inventory and debt levels,” Dabah concluded.
Delta Galil also reported, “As part of a strategic focus to further streamline its operations, the company decided in the second quarter of 2023 to further downsize its China operations.” And it pointed out that in the first quarter it had taken various other measures to improve operations including: “closed the Bare Necessities distribution center and transitioned to a third-party fulfillment center in Mexico; relocated Egypt cut and sew operations from Cairo to El-Minya; closed the socks production facility in Bulgaria, and moved production to a new facility in Egypt; implemented efficiency measures in the company’s 7 for All Mankind segment.”
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