DELTA GALIL DOWNGRADES EARNINGS, PLANS ACQUISITION

NEW YORK — Delta Galil Industries Ltd. joined the growing list of companies issuing third-quarter earnings warnings last week, but also reported its intent to acquire U.S.-based Inner Secrets, which would boost North American sales and lessen its exposure to currency fluctuations.
Delta Galil, based in Tel Aviv, said earnings per share in the third quarter, originally expected to fall between 35 and 40 cents a share, would be in the range of 25 to 30 cents, principally due to the weakness of the euro.
Delta Galil shares closed friday at 14, falling 1/8, after declining 10.2 percent immediately following last week’s warning.
Dov Lautman, chairman of Delta Galil, noted in a release that not only will the planned acquisition “contribute to reducing Delta Galil’s exposure to currency fluctuations” from the euro and other currencies, but it also will further the company’s plans to increase North American sales.
Inner Secrets’ customers include major retail chains such as Target, Wal-Mart, Kmart and Victoria’s Secret. The company, which recorded 1999 sales of about $90 million, outsources to Hong Kong, China, Indonesia, Bangladesh and points in the Western Hemisphere including Mexico and Haiti.
Delta Galil said the strategic goals of the acquisition were to provide a boost North American sales, establish the company as a major player in the mass market, which is a large part of the U.S. intimate apparel market, and to expand of its ladies’ intimate and bra categories.
The company, after the acquisition, expects its North American sales to grow to approximately one-half of revenues in 2001. In 1999, those sales were 20 percent of the total, while in 2000 North American sales accounted for 30 percent of the company’s overall sales.
The letter of intent specifies that Delta will pay approximately $55 million, 85 percent in cash and 15 percent in Delta Galil shares, for Inner Secrets. The shares of Inner Secrets are currently held by its senior management.
Delta Galil closed the purchase of Wundies Industries Inc. in September and also purchased the Canadian company, Dominion, in January. The company sells its products under brands including Polo Ralph Lauren, Donna Karan, Calvin Klein, Hugo Boss and Nike.

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