Delta Galil investors were left disappointed by the latest earnings report: are they right?

Investors were also concerned about the decline in gross margins in Q4. What caused it?

“In the past year, gross margins actually improved. In Q4, however, transportation costs increased across all our operating regions. We are already seeing those costs come down, so we’re optimistic. Additionally, because of our sales mix, we sold more brands with lower gross margins but higher operating profits. On top of that, exchange rate fluctuations—particularly the weakening of the shekel against the dollar—didn’t work in our favor. But overall, this was just one quarter in a year of improvement, so we remain very positive for 2025,” Dabah and Bendek explained.

Delta plans a major restructuring in its private-label manufacturing operations

As part of its ongoing efficiency drive, Delta announced a restructuring plan for its private-label operations in the Far East, which includes shutting down a plant in Thailand and reducing manufacturing activity in China. “We’ll be closing one of our two plants in Thailand during 2025 and shifting production to other sites and subcontractors,” Bendek explained. “We constantly assess where we can optimize production and costs to support continued growth and maintain profitability in our branded segment.”

You mentioned acquisitions as a key growth driver, but you haven’t announced any recently. What are you looking for?

“We’re looking for companies that are synergistic with Delta, but unfortunately, there’s nothing on the table right now. The opportunities we’ve seen have been too expensive, but we’re always monitoring the market,” Dabah said.

What will drive growth over the next two years?

“A lot of things. We’re a growth company. We’ve been growing consistently for 13 years, delivering strong profitability and cash flow. And as our forecasts show, we’ll continue growing next year as well.”

A strong year but weaker forecasts

Delta reported fourth-quarter revenue of $599.2 million, an 18% increase compared to the same quarter in 2023. Net income, excluding one-time items, grew by 8.4% to $41 million, up from $37.8 million a year ago. For 2025, the company expects revenue growth of 4%-6%, compared to 10% in 2024. Operating profit is projected to increase 4%-9% to $192-$200 million, while net income is expected to reach $112-$118 million, also reflecting 4%-9% growth.

One of the longest-standing companies on the Tel Aviv Stock Exchange, Delta has been operating since 1975, specializing in the production and marketing of apparel. Over the past year, its stock has climbed about 28% and now trades at a market capitalization of roughly 5.3 billion shekels.