Delta Apparel, Inc., the parent of M.J. Soffe, reported sales grew 20.5% in the fourth quarter ended July 3, to $126.2 million from $104.7 in the year ago period. Net income jumped 40.8% to $5.7 million, or 64 cents a share, versus $4.0 million, or 47 cents, in the prior year.
Gross margins in the quarter improved 70 basis points to 23.9%
Fiscal 2010 Highlights
* Net sales increased 19.5% to a record $424.4 million from $355.2 million in the prior year
* Gross margins improved 220 basis points to 23.7%
* Net income increased 88.8% to $12.2 million versus $6.5 million in fiscal year 2009
* Diluted EPS increased 84.2% to $1.40 compared to $0.76 last fiscal year
Robert W. Humphreys, Chairman and Chief Executive Officer, commented, “We are encouraged to have achieved our seventh consecutive year of sales growth. For the second successive year, each of our business units increased revenue, driving 14% organic growth on top of 8% organic growth in the prior year. We continue to gain new customers, expand business relationships with existing customers, add new license and marketing agreements, and expand our value-added services for our customers. Our flexible manufacturing platform is supporting our growth and is currently running near capacity. We have recently added equipment at Ceiba Textiles which should enhance our output and we expect to make additional investments as needed in fiscal year 2011 to support our long-term sales growth.”
Retail-Ready Apparel Segment Review
The retail-ready segment sales were $53.8 million in the fourth quarter of fiscal year 2010 compared to $50.0 million in the prior year fourth quarter. The 7.6% fourth quarter organic growth was driven by strong sales to department stores, independent sporting goods stores and outdoor retailers. For the full year, sales in the retail-ready segment grew 26.7%, or $41.7 million, to $197.8 million. This was achieved from 14% organic sales growth plus the additional revenue from To The Game, which was acquired in the fourth quarter of fiscal year 2009. The company believes strong consumer demand for its branded and licensed products allowed it to expand product categories and increase retail doors carrying its products, resulting in organic sales growth in fiscal year 2010. Gross margins in the retail-ready segment were 39.7% in the fourth quarter and 38.7% for the full fiscal year. Operating income was $5.8 million in the fourth quarter and $17.8 million for fiscal year 2010 compared to $17.6 million in the prior fiscal year.
Activewear Apparel Segment Review
The activewear segment had sales of $72.4 million for the quarter ended July 3, 2010, an increase of 32.2% compared to the prior year fourth quarter driven from sales growth in both catalog and private label products. For the full year, revenue increased $27.6 million, or 13.8%, to $226.6 million compared to $199.0 million in the prior year. The revenue increase was volume driven from increased unit sales of catalog products. Gross margins in the activewear segment were 12.2% in the fourth quarter and 10.7% for the full fiscal year. The activewear segment returned to profitability in the third fiscal quarter of 2010 and reported operating income of $2.7 million in the fourth fiscal quarter. Operating income was $2.4 million in fiscal year 2010, an improvement of $7.8 million from the operating loss of $5.4 million in fiscal year 2009.
Fiscal 2011 Guidance
The company reiterates its fiscal year 2011 outlook for sales and earnings. For the fiscal year ending July 2, 2011, the company still expects net sales to be in the range of $455 to $465 million and earnings to be in the range of $1.55 to $1.70 per diluted share. The sales outlook for fiscal 2011 includes anticipated organic growth of approximately 5% after adjusting for one less week in fiscal 2011, and approximately $25 million in additional revenues from The Cotton Exchange, which we recently acquired.
The company said it remains concerned about the challenging economic conditions which continue to impact consumer demand for apparel. In addition, volatile cotton prices, global yarn shortages and limited capacities in cargo freight have created further short-term challenges in the apparel marketplace. In determining its expectations for the upcoming year, the company believes it has taken into consideration these heightened risk factors.
“We reached many milestones during fiscal year 2010 and are excited about the opportunities we have as fiscal year 2011 begins. We have completed several strategic marketing and operational initiatives that we believe position us for continued organic growth. In addition, the recent acquisition of The Cotton Exchange should allow us to expand our collegiate and licensed offerings to new and existing customers in the bookstore, retail and military markets. Although the apparel marketplace remains very difficult, we believe we are positioned to continue our trends of sales and earnings growth which should build greater value for our shareholders in the future.”
| SELECTED FINANCIAL DATA: | ||||||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
| Jul 3, 2010 | Jun 27, 2009 | Jul 3, 2010 | Jun 27, 2009 | |||||||||||||||||||
| Net Sales | $ | 126,187 | $ | 104,739 | $ | 424,411 | $ | 355,197 | ||||||||||||||
| Cost of Goods Sold | 96,028 | 80,431 | 323,628 | 278,758 | ||||||||||||||||||
| Gross Profit | 30,159 | 24,308 | 100,783 | 76,439 | ||||||||||||||||||
| Selling, General and Administrative | 21,531 | 18,538 | 80,695 | 64,388 | ||||||||||||||||||
| Other Income, Net | (115 | ) | 145 | 74 | 96 | |||||||||||||||||
| Operating Income | 8,513 | 5,915 | 20,162 | 12,147 | ||||||||||||||||||
| Interest Expense, Net | 704 | 1,049 | 3,509 | 4,718 | ||||||||||||||||||
| Income Before Provision for Income Taxes | 7,809 | 4,866 | 16,653 | 7,429 | ||||||||||||||||||
| Provision for Income Taxes | 2,142 | 842 | 4,466 | 973 | ||||||||||||||||||
| Net Income | $ | 5,667 | $ | 4,024 | $ | 12,187 | $ | 6,456 | ||||||||||||||
| Weighted Average Shares Outstanding | ||||||||||||||||||||||
| Basic | 8,516 | 8,503 | 8,514 | 8,502 | ||||||||||||||||||
| Diluted | 8,861 | 8,507 | 8,733 | 8,502 | ||||||||||||||||||
