Growth in Sales in the United States, Europe and Israel, with a slight reduction in operations in Britain;

The company has decided to stop operations of the business unit in Britain under its current format

Delta Galil has decided to stop the operations of the group’s business unit in Britain and to make changes in its method of operations with the company’s customers in that country, as well as additional streamlining steps with the aim of improving its performance and its competitive abilities. In the first nine months of the year, the operations in Britain netted an operating loss of 9.5 million dollars and a net loss of 10.6 million dollars on sales of 34 million dollars. This unit’s activities are in the category of undergarments for women with the “Marks and Spencer” chain and additional customers.

The planned changes in the method of operations with customers in Britain include a transfer from the FSV (Full Service Vendor) method to the FOB method, as part of which the supply of products will be direct from the plant in Egypt, with the responsibility for shipping, storage and distribution being transferred to the customer. Furthermore, the company will stop maintaining inventory for the customers in Britain, and the responsibility for the management and risk inherent in its maintenance will be transferred to them. The company will also act to change the currency of sale to American dollars.

Delta will take additional steps with the aim of minimizing fixed costs in its operations in Britain, including the transfer of product development from Britain and Israel to the company’s plant in Egypt. It will close the bra development center in Mansfield in Britain, and significantly reduce the operations of its London office, such that it will operate as a sales office and will minimize overhead in Israel and Egypt that is connected with the operations in Britain. The company will continue maintaining operations in the socks sector in Britain, as well as bra and children’s clothing operations which will be handled from the United States while using the company’s existing knowledge base and excellence in these categories.

Due to the cessation of operations of the business unit in Britain, the company will register expenses totaling some 5 to 7 million dollars. The company expects that, as part of these processes, some 100 employees will be dismissed in Britain and Israel, and that the implementation of these processes will end by the third quarter of 2009.

Delta Galil completed the third quarter of 2008 with sales totaling 167.7 million dollars, compared with 172.4 million dollars in the same quarter last year, a reduction of 2.7%. Operating profit was balanced, compared with an operating profit of 8.5 million dollars in the same quarter last year. The loss attributed to the company’s share holders in the third quarter of 2008 amounted to 4.5 million dollars, compared with a net profit of 3.3 million dollars in the same quarter last year.

The company’s results in the first nine months of 2008, compared with the same period last year, show sales totaling 479.3 million dollars compared with 481.5 million dollars, a decrease of 0.5%. Operating profit totaled 5 million dollars compared with an operating profit of 0.1 million dollars, and compared with an operating profit of 10.9 million dollars before reorganization expenses. The loss attributed to the company’s share holders totaled 4.4 million dollars, compared with 13.9 million dollars and compared with 3.1 million dollars before reorganization expenses.

The decrease in sales in the third quarter, and in the first nine months of 2008, compared with the same periods last year derived from the decrease in sales in Britain (35.2% in the quarter and 32.7% in the nine months), mainly to the Marks and Spencer chain, which was mostly offset by a growth in sales in the United States (3.6% in the quarter and 4.5% in the nine months), growth in Europe (9.5% in the quarter and 29.7% in the nine months) and growth in sales in Israel (16.2% in the quarter and 16.9% in the nine months).

The results in the third quarter and in the first nine months of the year were influenced mainly by the operations in Britain with the principal customer, both due to the initiated exit from non-profitable categories and due to the weakness in the customer’s sales. The scope of sales to the client is expected to amount to some 75 million dollars in 2008, compared with 134 million dollars in 2007. This activity created an operating loss totaling 3.5 million dollars in the third quarter this year and 9.5 million dollars in the first nine months of the year. The operating loss was derived from a significant decrease in sales to the customer and from the time period required to adjust the fixed expenses to the reduction in activities.

Delta Galil, controlled by Isaac Dabah of the United States (some 49%), is a leading global manufacturer of undergarments. The group operates in the design, development, manufacturing, marketing and sales of undergarment products and socks for women, men and children. The company’s clients include, inter alia, leading retail chains such as WalMart, Marks and Spencer, Target, Hema, and Victoria’s Secret, as well as leading brands including, inter alia, Nike, Hugo Boss, Calvin Klein and Tommy Hilfiger. The company also sells its products under brand names that it has licensed, including, inter alia, Maidenform, Converse, and Wilson, and under the private “Delta” brand in the local market.

Dror Sharvit – Investor Relations
Mail: dror-s@zahav.net.il
Phone: +972-8-915-5919
Fax:: +972-8-915-5920