Having clocked in record sales after its purchase of denim outfit Seven For All Mankind and a slew of other brands, Delta Galil Industries Ltd. is on the lookout for its next acquisition.
“We are certainly always looking at opportunities and I think there’s probably more opportunities today than there were a year or two ago, but we’re being very picky as to what would be right for us,” Isaac Dabah, ceo of Delta Galil, told WWD in an interview following the release of its fourth-quarter earnings.
The Israeli-based apparel company paid VF Corp. $120 million for Seven For All Mankind and Splendid/Ella Moss in 2016. Most recently, it acquired Eminence Group and has been busy incorporating its underwear brands Eminence, Athena and Liabel into the business.
The spending spree looks to be paying off. Sales increased 22 percent in the fourth quarter of 2018 to a record $454.3 million, from $371.6 million in the fourth quarter of 2017. Net income, meanwhile, was up 23 percent to $24.7 million, compared to $20.1 million a year earlier.
“We had a great quarter and now we have to continue it,” said Dabah, adding that the only damp spot was that the European business was slightly behind U.S. growth, partly due to political upset in France and a weaker than expected performance in Germany.
As for whether potential tariffs from the U.S. on Chinese-made apparel could disrupt business, Dabah said only 30 percent of its product is produced in China and that is set to fall to 25 percent due to rising costs.
However, if apparel gets pulled into the fray (so far it’s mainly been handbag retailers that have been hit), then Delta Galil will consider leaving China.
“Time will tell, but if it happens we will have to see how we can move the product elsewhere,” said Dabah, who calculated that the process would take between a year and a year and a half. It also sources goods from Vietnam, Egypt, Cambodia and Indonesia.
The U.S. government is in a 90-day trade truce with China, although that may get extended. If the talks fail, the Trump administration has said tariffs for handbag retailers would rise further and it would also mean that levies on a further $267 billion of goods — something it has threatened — would become much more likely. If that materializes, it would be difficult for the apparel sector to emerge unscathed.