Delta Apparel saw strong growth from its recently acquired Junkfood brand coupled with slight growth at Soffe overcome a less than spectacular performance from the companys namesake Delta business.
In the Activewear segment, which includes Delta, sales were down 15.9%. Management attributed this decline to weakness in long-sleeved ts as a result of competitively priced fleece, as well as last years record second quarter. On a bright note for the division, the customer base continues to diversify and has grown 15% during the last six months. The Catalog/Direct portion of the segments business continues to be the workhorse, accounting for 86% of sales, with the remainder coming from Private Label.
On the Retail-Ready side, which includes Junkfood and Soffe, management focused on improving Junkfoods infrastructure and increasing Soffes penetration amongst its four channels of distribution, Sporting Goods, Retail, Military, and College Bookstores. Management said during a conference call with analysts that Junkfood accounted for “a little over $13 million” in sales, which was “more than double the prior years quarter.” That sales level for Junkfood would put Soffes growth in approximately the 4% to 6% range. Management hinted at signing new licenses within this segment, specifically mentioning beer and motor oils to help make Junkfood more marketable in mens and a “just about complete Soffe accessory license.”
The remarkably strong gross margins growth, up 970 basis points, was attributed to strong margins in the Junkfood business, lower year-over-year cotton prices in the Activewear segment, and increased manufacturing efficiencies as a result of the back-end synergies found by merging distribution for the companys brands.
For the third fiscal quarter, the company expects sales in the range of $66 to $70 million and basic earnings in the range of 29 cents to 33 cents per share. For the full year, the company continues to expect sales to be in the range of $265 to $275 million and basic earnings to be in the range of $1.71 to $1.80 per share.
| Delta Apparel, Inc. | |||
| Second Quarter Results | |||
| (in $ millions) | 2005 | 2004 | Change |
| Total Sales | $57.7 | $49.2 | 17.3% |
| Activewear | $28.5 | $33.9 | -15.9% |
| Retail-Ready | $29.2 | $15.3 | 90.8% |
| Oper. Income | $4.9 | $2.7 | 82.3% |
| Activewear | $2.2 | $1.9 | 15.8% |
| Retail-Ready | $2.7 | $0.9 | 200% |
| Gross Margin | 31.7% | 22.0% | 970 |
| SG&A | 23.9% | 16.5% | 740 |
| Net Income | $2.40 | $1.15 | 106% |
| Diluted EPS | 27¢ | 13¢ | 108% |
| Inventories* | $114.8 | $106.7 | 7.6% |
