Speaking at the 2023 ICR Conference, Delta Apparel, Inc. officials said four out of its five primary market channels, including Salt Life and DTG2Go, saw double-digit growth in the fiscal first quarter ended December 31, but elevated inventory levels at the mass channel continue to impact its Delta Direct business to drive a slight sales decline in the fiscal first quarter ended December 31.
Matthew Miller, president, Delta Group, said the Delta Direct business is “sort of the core and the foundation of the business. That’s where we started.” The Delta Direct segment represents roughly half of the activewear business.
Miller said, “That’s basically selling blank t-shirts into the retail channel so selling the people who then sell into Walmart, Target, Kohl’s and places like that. But it’s also selling to the ad specialty and the regional screen printer channels. So it’s kind of a blank t-shirt business.”
Delta Direct has expanded to ancillary products such as hats, fleece and golf shirts to add new revenue streams but recently has been hurt by softening demand that’s leading to elevated inventories at mass retail, including Walmart and Target, and ultimately impacting order rates.
Miller said, “There’s a lot of over-inventoried retailers so we’re kind of a couple of steps back from that. But we’ve clearly felt the challenge of that position. We’re obviously looking for that business to turn around here in the near future, but that has been a little softer given where the macro retail environments built in.”
Relatedly, Delta Apparel has been operating some of its facilities at less than full capacity in the first half of fiscal 2023 until inventories better align with overall demand.
Delta Apparel’s other four go-to-market strategies include, Global Brands, Retail Direct, DTG2Go, and Salt Life, and all saw healthy growth in the first quarter, led by 17 percent sales growth in the Salt Life Group segment and 20 percent growth at DTG2Go.
Salt Life’s growth was boosted by double-digit growth across its direct-to-consumer retail and e-commerce channels.
Jeff Stillwell, president, Salt Life Group, said Salt Life, acquired by Delta Apparel in 2013, was initially a “pretty hardcore fishing brand” but has transitioned into a lifestyle brand.
“It’s very aspirational. It’s very interpretive,” said Stillwell. “Everything that we do in the business is related around fish, surf and dive and the lifestyle around that.”
Salt Life has a loyal group of followers with a social media following that’s a lot larger than the size of the brand represents. Stillwell, “We get great feedback from that.”
Salt Life closed its fiscal 2022 year with 20 percent growth and is expected to deliver “strong double-digit growth” in the current year with a gross margin level of about 50 percent. The brand has expanded is in the Caribbean and Mexico but is just exploring international growth.
The DTG2Go business is estimated to be the largest digital print operation in the world outside one operated by Amazon.
“I don’t think there’s anybody else in the world that is doing what we’re doing at the scale and sort of level of competency that we have,” said Miller. “We have multiple different technology platforms that we print on. We’re able to onboard new customers very quickly. And frankly, even over the last year, we’ve brought on another digital printing platform and spent a lot of time investing in and learning another technology and we believe that combination of what we can offer to the marketplace is unique.”
DTG2Go has a network of eight facilities across the country that support delivery to “99 percent of the U.S. population in two days.” Inventory needs are supported by having the facilities sit alongside a traditional Delta Apparel warehouse to quickly serve its customers.
Miller said the DTG2Go business started small with e-tailers and e-commerce platforms often looking to get user-generated art printed one at a time. He said larger firms are recognizing the advantages of digital print capability over a traditional screen print run. Miller said, “People are realizing that they can reduce their inventory, shorten their lead times and see a faster time-to-porch for the customer. We see a lot of growth in other types of business tapping into that advantage as it provides a lot more flexibility in the supply chain.”
Double-digit growth was also seen in the first quarter for its two remaining go-to-market channels: Global Brands and Retail Direct. Global Brands offers custom product development and other supply chain services for other multi-national brands such as Under Armour and Carter’s as well as trendy regional brands, and all branches of the U.S. armed forces. The Retail Direct channel sells the company’s Delta, Delta Platinum, and Soffe products.
The Global Brands channel is particularly benefiting from Delta Apparel’s vertical sourcing platform based in Central America as many brands and retailers increasingly look at nearshoring following extensive supply chain disruption in recent years.
Said Miller, “We’ve got 8,000 associates offshore in multiple locations that do a great job for us every day. And that’s a huge asset for us and we think that’s going to continue so really excited about the trend.”
Photo courtesy Salt Life