Delta Galil Industries (Nasdaq: DELT) published a profit warning today, reflected a 25% drop in per share profits for the 2000 Q3. Delta also announced that it signed an MOU to acquire US textile company Inner Secrets for $55 million. The capital market responded to the announcement by plunging Delta’s share price by over 12%.
Delta general manager Amnon Tiberg said that the reason for the profit warning is the weakness of the euro and the “unprecedented” strengthening of the shekel vis-a-vis the dollar. Delta mainly exports to the US and Europe and was therefore hit by the weakness of the euro and dollar.
Tiberg said that Q3 forecasts were based on different exchange rates, and that the profit warning does not reflect problems in sales or with customers. “Delta grew nicely, in accordance with its strategic goals. Regrettably, there are major external factors that affect us,” he said.
Tiberg noted that despite the decline in per share profits, Delta is meeting its targets, and will exceed its sales target for 2001.
Regarding the agreement with Inner Secrets, Delta will pay $55 million: 85% in cash and the rest in shares. The deal is subject to various approvals and due diligence.
Inner Secrets manufactures private brands of women’s lingerie, mainly bras. Annual sales amount to $90 million. Customers include US mass market chains that Delta wants to penetrate, including WalMart, K-Mart, Target and JC Penny.
The deal, if realized, joins two previous Delta acquisitions in the US: socks manufacturer Dominion and women’s and girl’s casual lingerie manufacturer Wundies, which complement Inner Secret’s product line. Delta plans to increase its sales in the US market and penetrate the mass market sector with this acquisition.
Tiberg estimated today that due to the acquisition of the three companies, Delta’s US operations will reach $220-230 million in 2001, with sales of $300 million.
Published by Israel's Business Arena on ý11ý Octoberý 2000