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Delta Galil reports rise in Q4 and FY16 sales and profit

Delta Galil Industries, manufacturer and marketer of branded and private label apparel products for men, women and children, as well as leisurewear, jeans and activewear, reported sales of 376.3 million dollars for the fourth quarter, a 31 percent increase compared to 287.1 million dollars for the same quarter last year. Sales for the full year were 1,179.2 million dollars, a 9 percent increase from 1,080 million dollars for the 2015 full year.

Commenting on the company’s positive trading, Isaac Dabah, CEO of Delta Galil, said in a statement, “We are very pleased with our results for 2016, which concluded with a particularly strong fourth quarter and reflected all-time high sales, operating profit and cash flow. During the year, we made the successful acquisition of 7 For All Mankind, Splendid and Ella Moss, reflecting our strategic efforts to grow Delta Galil’s branded business and expand our global footprint.”

Operating profit rises 80 percent in Q4

Operating profit increased 80 percent to 32.3 million dollars in the fourth quarter compared to 17.9 million dollars in the fourth quarter last year. For the 2016 full year, operating profit grew 23 percent to 85.3 million dollars, compared to 69 million dollars for the 2015 full year. Operating profit excluding one-time items increased 36 percent in the fourth quarter of 2016, and amounted to 32.3 million dollars, compared to 23.7 million dollars last year. For the 2016 full year, operating profit excluding one-time items amounted to 83.2 million dollars, compared to 75.5 million dollars last year, representing a 10 percent increase.

Net income increased 51 percent to 18.5 million dollars in the fourth quarter compared to 12.3 million dollars in the same quarter last year. Net income excluding one-time items totaled 18.5 million dollars, compared to 16 million dollars for the same period last year, representing a 16 percent increase. Diluted earnings per share increased 52 percent in the quarter to 0.73 dollar, compared to 0.48 dollar for the same quarter last year.

For the 2016 full year, net income was 51.9 million dollars or 2.03 dollars per diluted share, compared to 43.8 million dollars or 1.71 dollars per diluted share for the same period of 2015, representing a 18 percent increase.

Expects 13 to 16 percent rise in FY17 sales

Delta Galil said full-year 2017 sales are expected to range between 1,330 million dollars-1,370 million dollars, representing an increase of 13 percent-16 percent. Full-year 2017 EBIT is expected to range between 86 million dollars-91 million dollars, representing an increase of 3 percent-9 percent from 2016 actual EBIT of 83.2 million dollars, while full-year EBITDA is expected to range between 113 million dollars-118 million dollars, representing an increase of 6 percent-10 percent.

Net income is expected to range between 50 million dollars-52 million dollars, representing an increase of 6 percent-10 percent and diluted EPS is expected to range between 1.95 dollars-2.02 dollars, representing an increase of 5 percent-9 percent from 2016 actual EPS of 1.85 dollars.

Picture:Facebook/7 For All Mankind

Gap posts uptick in Q4 comparable sales of 2 percent

Fourth quarter comparable sales at Gap were up 2 percent compared with a decline of 7 percent last year. On a reported basis, diluted earnings per share at Gap, were 0.55 dollar for the fourth quarter and 1.69 dollars for fiscal year 2016. The company’s adjusted diluted earnings per share were 0.51 dollar for the quarter and 2.02 dollars for fiscal year.

“We’re pleased to finish the year strong, with positive comp and sales growth during the critical holiday quarter,” said Art Peck, CEO of Gap in a press release, adding, “Going forward, we will maintain our focus on improving the quality and relevance of our products, increasing our responsiveness to trends and demand, and creating more synergy across channels to deliver the experiences our customers want and expect, however they choose to shop.”

Q4 net sales up 1 percent

Fourth quarter net sales increased 1 percent to 4.43 billion dollars and fiscal year 2016 net sales were 15.5 billion dollars. The translation of foreign currencies into US dollars, the company said, negatively impacted the company’s reported net sales for fiscal year by about 20 million dollars.

For fiscal 2016, the company’s comparable sales were down 2 percent compared with a decline of 4 percent last year. Comparable sales at Old Navy Global were positive 1 percent versus flat last year, at Gap Global: negative 3 percent versus negative 6 percent last year and Banana Republic Global: negative 7 percent versus negative 10 percent last year.

2017 comparable sales expected to grow slightly

For fiscal year 2017, the company expects diluted earnings per share to be in the range of 1.95 dollars to 2.05 dollars, which includes the estimated negative impact of approximately 0.09 dollar due to foreign currency fluctuations at current exchange rates. This impact equates to approximately 5 percentage points of earnings per share growth when compared with the company’s adjusted diluted earnings per share of 2.02 dollars for fiscal year 2016.

The company also noted that comparable sales for fiscal year are expected to be flat to up slightly. Net sales are expected to be slightly below this range driven by an expected negative impact from foreign currency fluctuations year-over-year.

It expects its reported diluted earnings per share for the first half to be down in the high single digits when compared with the adjusted diluted earnings per share for the first half of fiscal year 2016. During the year, the company expects to open about 40 company-operated stores, net of closures and repositions. In line with its strategy, the company expects store openings to be focused on Athleta and Old Navy locations, with closures weighted toward Gap brand.

Picture:Old Navy

Billabong losses widens in the first half

Billabong’s total sales of 508.3 million Australian dollars (392 million dollars) were down 5.8 percent on constant currency, taking the sale of Sector 9 into account. Group EBITDA excluding significant items of 29.3 million Australian dollars (22 million dollars) was down 21.1percent as reported and 20.9 percent on constant currency.

Commenting on the first half development, Billabong Chief Executive Officer Neil Fiske said in a press release, “We would see a lift in the second half such that we expect full year EBITDA will be ahead of the prior period on a comparable basis. With yesterday’s announcement regarding the sale of Tigerlily, we’re simplifying our portfolio and paying down debt. We’re seeing a strong profit lift in the Americas. On that basis we affirm our FY17 EBITDA guidance, adjusting for Tigerlily.”

Billabong EBITDA doubles in the Americas

The company said, overall, gross margins were flat to the prior period. A net statutory loss of 16.1 million Australian dollars (12 million dollars) was recorded compared with a loss of 1.6 million Australian dollars (1.23 million dollars).

The company said, standout result was in the Americas, where EBITDA before global allocations more than doubled to 10.3 million dollars (up 6.2 million dollars or 152 percent), with earnings momentum extending into the second half on the back of margin growth of 170 basis points and lower costs. After a slow first quarter, sales and margins improved in the second quarter. Sales were down overall for the half, reflecting the effect of the sale of Sector 9, some store closures and a fall in orders from a large United States retailer which was in Chapter 11 for a part of the period.

However, comparable direct-to-consumer revenue (including ecommerce and bricks and mortar stores) was up 5.8 percent on a constant currency to 57.9 million dollars for the half. Revenue from ecommerce grew 22.7 percent in the half, driven by a 41.5 percent pcp gain from Brand Billabong in North America.

The overall retail market in Asia-Pacific faced significant challenges in the first half. Retail trading improved in November and December with comparable store sales slightly positive in December although down 3.7 percent for the half. Amidst all of this, RVCA grew again with wholesale equivalent revenue (including sales to owned retail) up 14 percent constant currency. Ecommerce grew 17.7 percent to 4.9 million Australian dollars (3.7 million dollars) for the half.

After a period of improvement in Europe, Billabong said, trading moderated in the first half following the late arrival of cooler weather and macro factors such as Brexit. Comparable direct-to-consumer revenue was up 1.3 percent constant currency, with a slight dip in bricks and mortar sales being more than offset by a 44.4 percent increase in constant currency ecommerce revenue.

“There are three key aspects to the first half result that give us confidence going into the remainder of the year,” said Friske, adding, First, there is a strong profit lift in the Americas as we enter its seasonally bigger second half. Gross margins in the region were up 170 basis points overall year-on-year. Inventory was much improved, CODB was down and EBITDA more than doubled. Next, we are seeing forward gross margins improving in every region, as the benefits begin to flow from our global sourcing and concept to customer initiatives. Leaner inventories and the absence of any further currency pressures that have impacted recent results in Asia-Pacific and Europe also give us confidence.”

Billabong expects to post improved EBITDA in H2

The expected improvement in the underlying EBITDA for the second half of the 2017, the company said continues to be based on line-of-sight improvements from the group’s key initiatives.

Billabong said, the group’s previous guidance of EBITDA in the 60-65 million Australian dollars (46-50 million dollars) range for the 2017 financial year needs to be updated for the sale of Tigerlily which will be treated as a discontinued operation in the 2017 full year results. This treatment is expected to reduce the group’s continuing business EBITDA reported for the year by approximately 8 million Australian dollars (6.1 million dollars), which represents Tigerlily’s full twelve month EBITDA contribution to the group.

Picture:Facebook/Billabong

Demonetisation Effect: Q3 CMAI Apparel Index growth lowest at 1.4 points

CMAI’s Apparel Index for Q3 Oct-Dec FY 2016-17 shows this quarter had the lowest growth so far with overall Index Value at 1.4 points compared to previous quarter (July-Sept FY 2016-17) where overall Index Value was 4.64 points. The dismal growth last quarter is a fallout of ‘Demonetisation’ that impacted all segments and sectors of Indian economy including the apparel industry. Within apparel industry, the impact has been felt across the board. However, big brands seem to have adapted and managed growth. While Large Brands (turnover of Rs 100 to Rs 300 crores), were at 7.23 and Giant Brands (turnover of R 300 crores and more) scored 8 points respectively. Small brands (turnover of Rs 10-25 crores) however, have been hit badly recording negative growth at -0.55 points, while mid brands (turnover of Rs 25 to 100 crores) managed to grow a meagre 1.22 points.

Big brands, maintained growth with fast clearance off goods and discounts that increased Sales Turnover to 4 and 6.67 points and reduced inventory holding increase to just 0.68 and 1.77 points respectively. Comparatively, Small and Mid brands lost Sales Turnover this quarter by 0.45 and 0.22 points and Inventory Holding increased for Small Brands at 2.70 and Mid Brands at 1.25 points. This had a cumulative impact on Sales Turnover and Inventory Holding of Overall Index Value as Small brands and Mid brands outnumber Large and Giant Brands greatly.

Large, Giant brands continue to lead

Q3 Apparel Index clearly indicates that large and giant brands have outdone mid and small brands. Small and mid brands lost sales turnover, and one of the main reasons could be demonetization and its impact on overall retail sales. Smaller retailers and brands associated with them had much larger transactions based on cash instead of credit cards or other digital modes. Drop in sales impacted stocks clearance and hence, increased Inventory Holding affecting doubly the Index value of both (small and mid brands). Large brands and giant brands on the other hand, connected with organized retail through MBOs, EBOs and Large Format Stores took the deep discounting route thereby stimulating sales to clear off inventory at store and company level this is clearly reflected in increased Sales Turnover and restricted Inventory Holding in effect pushing up their Index at 7.23 and 8 points.

Since small and mid brands are more dependent on trade and have less control on retail, they couldn’t push sales, while large and giant brands could stimulate sales turnover thereby restricting Inventory Holding. As Vineet Gautam, Country Head, Bestseller India explains, “We have seen more than 50 per cent surge in sales for ONLY compared to last year. We had planned and added 40 new doors to the brand, which automatically implied an increase in inventory holding. Also, the key to managing increased inventory holding is increasing sell out. For ONLY, we successfully managed to increase sell out.” Arguing on similar lines Anant Daga, VP, ‘W’ and Aurelia, says, “Sales growth surge is backed by high double digit SSSG and aggressive expansion. Inventory reduction is a result of better than expected sales against planned buys.”

Explaining the plight of winter wear makers and retailers which was impacted the most due to demonetization Vinod Kumar Gupta, MD, Dollar Industries, says, “Some of our products like thermals are seasonal in nature and production had been done in the month of July and August, to be sold up in winter months. But with demonetization, the entire industry witnessed a drastic fall in the last quarter. Naturally our inventory increased by a huge margin. But with summer approaching and the new financial year, we are hoping all summer products are sold and closing stock goes down.”

Demonetisation Effect: Q3 CMAI Apparel Index growth lowest at 1.4 points Classis Polo attributes increased Sales Turnover and better Sell Through, to a better designed product that catches consumers’ fancy. As Usha Periasamy, VP - Operations & Brand, Classis Polo opines, “Fine research in understanding the design needs of the target group and market thereby upgrading creativity to meet expectations precisely. Earlier, Classic Polo range had striper dominated tee's and basic collections but now non striper fashion category has taken over which is reaping results. We have identified the most liked categories in shirts and trousers viz., printed shirts and Lycra bottoms are order of the day.” In fact, brands getting closer to customer expectations and is the real reason behind turnover and sales push. This effect will be more evidently in the next fiscal.

In fact around 41 per cent brands feel the outlook for next quarter is ‘Good’, another 10 per cent say the outlook is ‘Excellent’. Nearly 42 per cent foresee an average outlook and 7 per cent (previous quarter also 2) feel it will be ‘Below Average’. Next quarter being the last quarter of the year, brands assume demonetization impact though phasing out will still be there as consumers will take time to return to stores.

CMAl's Apparel Index

CMAl's Apparel Index aims to set a benchmark for the entire domestic apparel industry and helps brands in taking informed business decisions. For investors, industry players, stakeholders and policymakers the index is a useful tool offering concrete and credible information, and is an excellent source for assessing the performance of the industry. The Index is analysed on assessing the performance on four parameters: Sales Turnover, Sell Through (percentage of fresh stocks sold), number of days of Inventory Holding and Investments (signifying future confidence) in brand development and brand building. The Apparel Index research is conducted by DFU Publications.

Globus has failed to keep up with Shoppers Stop, Pantaloons, Lifestyle and others which entered the fashion segment around the same time or much later. With losses at Rs 24 crores in 2015-16, the accumulated losses at the fashion chain have now gone up to Rs 241.19 crores. The retailer’s sales were up just 2.7 per cent and consequently the loss before interest, taxes depreciation and amortisation widened to Rs 2.52 crores. Operating expenses in 2015-16 rose 2.9 per cent. Total debt of the company increased 11.9 per cent.

In the June 2016 quarter, the retailer shut two loss making stores, leaving it with 35 stores. Whereas Pantaloons has 179 stores and one factory outlet. Shoppers Stop has 80 department stores while Westside has 104 stores. Reliance Trend has 300 stores. Globus has, during the year, responded to this challenge by selling its products from most the major e-commerce sites and has seen a good potential of growth there. The company is also investing in upgrading its own e-commerce site with all latest features.

The fashion category in India has been growing by 12 per cent to 13 per cent every year for the last five years and fetches higher margins. Most fashion retailers are performing well and better than food and grocery or jewelry players. That means Globus needs to change its strategy.

L Brands Q4 earnings rise to 2.18 dollars but outlook subdued

L Brands earnings per share for the fourth quarter ended January 28, 2017, were 2.18 dollars compared to 2.15 dollars for the prior year quarter. Earnings per share for the year ended January 28, 2017, were 3.98 dollars compared to 4.22 dollars for the year ended Jan. 30, 2016.

Fourth quarter result summary

Fourth quarter operating income decreased 8 percent to 987.6 million dollars compared to 1.078 billion dollars last year, and net income was 631.7 million dollars compared to 636 million dollars last year.

The company said, reported results above include a favorable tax settlement of 41.7 million dollars, or 0.14 dollar per share. Excluding this, adjusted net income decreased 7 percent to 590 million dollars compared to 636 million dollars last year, and adjusted earnings per share decreased 6 percent to 2.03 dollars compared to 2.15 dollars last year.

Net sales for the quarter were 4.489 billion dollars, an increase of 2 percent compared to 4.395 billion dollars for the quarter ended January 30, 2016. Comparable sales for the period were flat. L Brands said, for the fourth quarter, the exit of the swim and apparel categories had a negative impact of 2 percentage points and 4 percentage points to total company and Victoria’s Secret comparable sales, respectively.

Full-year result highlights

Full-year operating income was 2.003 billion dollars compared to 2.192 billion dollars last year, and net income was 1.158 billion dollars compared to 1.253 billion dollars last year.

The company said, reported results above include certain significant items such as a pre-tax gain of 108.3 million dollars (0.24 dollar per share) related to a cash distribution from Easton Town Center; a pre-tax charge of 35.8 million dollars (0.08 dollar per share) related to the early extinguishment of the company’s July 2017 notes; pre-tax charges of 34.5 million dollars (0.07 dollar per share) related to previously announced actions at Victoria’s Secret, including severance charges, fabric cancellations and the write-off of catalogue paper; and a favorable tax settlement of 41.7 million dollars (0.14 dollar per share) in 2016.

The benefit of actions taken in 2015 include a pre-tax gain of 78.1 million dollars (0.23 dollar per share) on the sale of the company’s remaining interest in the third-party apparel sourcing business. Excluding the significant items above, adjusted full-year earnings per share decreased 6 percent to 3.74 dollars compared to 3.99 dollars last year, adjusted operating income decreased 7 percent to 2.037 billion dollars compared to 2.192 billion dollars last year and adjusted net income decreased 8 percent to 1.090 billion dollars compared to 1.184 billion dollars last year.

Net sales for the year were 12.574 billion dollars, an increase of 3 percent compared to 12.154 billion dollars for the year ended January 30, 2016. Comparable sales for the year increased 2 percent. For the year, the exit of the swim and apparel categories had a negative impact of 2 percentage points and 3 percentage points to total company and Victoria’s Secret comparable sales, respectively.

Expects exit from swim and apparel to impact FY17 results

The company currently expects 2017 full-year earnings per share to be between 3.05 dollars and 3.35 dollars, including earnings per share between 0.20 dollars and 0.25 dollars in the first quarter. The company said, 2017 earnings per share forecast includes negative impacts related to the exit of the swim and apparel categories at Victoria’s Secret, continued investment in China and investment in real estate at Victoria’s Secret and Bath & Body Works.

The company expects to report a mid-to-high-teens decrease in February comparable sales, below expectations for a mid-single digit decrease, reflecting a decline of about 20 percent at Victoria’s Secret and a mid-single digit decline at Bath & Body Works. The exit of swim and apparel at Victoria’s Secret is negatively impacting total company comparable sales by about 6 percentage points.

Summary
Q4 earnings up 2.18 dollars
FY16 earnings down 3.98 dollars
  • L Brands forecasts negative impacts on FY17 results due to the exit of the swim and apparel categories at Victoria’s Secret, continued investment in China and investment in real estate at Victoria’s Secret and Bath & Body Works.
  • The company expects to report a mid-to-high-teens decrease in February comparable sales, below expectations for a mid-single digit decrease, reflecting a decline of about 20 percent at Victoria’s Secret and a mid-single digit decline at Bath & Body Works.

Picture:Victoria's Secret

Snapdeal expects to turn profitable in the next two years. Snapdeal’s EBITDA (earnings before interest, tax, depreciation and amortization) for the nine months of the current financial year has improved by about 40 per cent from a year earlier.

Marketplace providers like Snapdeal earn commissions from sellers on their platform as a percentage of value of goods sold. Snapdeal has a 12 percentage share of the gross merchandise value. Flipkart’s is 43 per cent and Amazon’s is 28 per cent.

Snapdeal’s focus is on getting good quality products and on-time delivery at the lowest possible cost. It has a captive logistics arm Vulcan Express. Vulcan has helped Snapdeal make inroads into the far-flung corners of India. Snapdeal, which also uses third party logistics services to deliver products to customers, has plans to allow Vulcan to seek external business in the coming months. The reasoning is that it isn’t viable to build a 500-city network in India with only one customer as a logistics company.

The value of goods sold online in India is expected to jump tenfold by 2025. But competition and discounting have meant most big online retailers are losing money.

Voonik is looking to turn profitable by 2017. The fashion e-commerce portal, which offers a personalised selection of apparel for customers, is cutting costs, improving efficiency and engaging customers to return to shop on the platform. It has focused on improving user experience and delivery to customers. At the same time, it also has expanded the number of sellers on its platform to offer more choices to young customers who look at everyday fashion. The aim is to grow from 65 to 70 million shoppers currently to 100 million in the next 12 months.

Voonik is backed by Sequoia Capital. Its burn has come down by half due to a combination of marketing efficiency, break even on each customer as well as a reduction in fixed cost. Reduction in tech cost by 50 per cent has helped reduce the burn rate.

The company also reduced its customer acquisition cost by 50 per cent. It spends Rs 200 on each new customer acquired. While it earlier took 14 months to earn this money back from customers through commissions it now takes seven months. The average delivery time has come down from seven days to five days. This year Voonik will focus a lot on stylist help to customers.

Future Retail has posted a standalone net profit of Rs 101.05 crores for the third quarter ended December 31. The company had posted a net profit of Rs 53.83 crores in the October-December period of the previous fiscal. Total income from operations stood at Rs 4,420.12 crores in the quarter under review as against Rs 2,496.07 crores in the year-ago period.

Future Retail is the flagship company of the Future Group. It operates multiple retail formats in both the hypermarket, supermarket and home segments of the Indian consumer market including Big Bazaar, fbb, Food Bazaar, Home Town. It serves customers in more than 240 cities across the country through over 11 million square feet of retail space.

The retailer has a multi-pronged strategy to boost profitability by expanding its small store network, increasing margins in the food and fast-moving consumer goods portfolio, building an omni-channel network, increasing stock velocity and leveraging its customer data across group companies to increase sales per customer.

In May 2015, Future Group had agreed to merge its retail business with rival Bharti Retail in an all-stock deal. The name of the company has been changed from Bharti Retail to Future Retail. Future Retail’s standalone net profit for the second quarter was Rs 73.63 crores.

612 League crossed a turnover of Rs 100 crores in 2016. Now its targeting a turnover of Rs 400 crores in the next five years. The junior wear brand, launched in 2009, is known for a strong, differentiated product range and a wide market presence. The brand offers a complete range of trendy, high quality, affordable and comfortable apparel for boys and girls, in knits and woven, for both summer and winter. It caters to the age group six months to 12 years. 612 League is probably the first Indian clothing brand focusing on pre-teen children. At the core of 612 League is the belief that a tween, that is, a child who is not yet a teenager, is aware of many adult issues and aspires to a teenager lifestyle. There are 460 points of sale across 140 cities in India, which will increase to 800 points of sale. The number of EBOs will be increased to 200. Right now there are 51 EBOs.

The brand promotes an active lifestyle by offering products with suitable fabrics, and strictly adhering to quality where every button, zip and other accessory undergoes stringent tests to ensure that the products remain hassle free for a long time.

The products have been extended to different age groups — a baby range for infants and toddlers, Candy Pop, which is party wear for girls, Spring Soul, which is Indian ethnic wear, and Fearless, a separate high fashion range for teenage girls. Going forward, 612 League will expand its apparel portfolio by launching innerwear, sleepwear, shoes and accessories.