Delta Apparel’s Retail-Ready apparel segment, comprised of the Soffe, Junkfood and To The Game brands, boosted overall fiscal first quarter revenues even as the company’s Activewear business declined. Sales grew 8.4% to $99.1 million for the three-month period ended Sept. 26 from $91.4 million in the year-ago period.
Overall, gross margins for Delta increased 280 basis points to 23.9% compared to 21.1% in the prior year’s fiscal first quarter. The company said the improvement in gross margin was primarily due to a higher mix of Retail-Ready segment sales and improved margins in the Activewear segment.
Activewear gross margins improved 370 basis points from the prior year first quarter and were partially offset by a gross margin decline in the Retail-Ready segment.
Operating profit was $4.5 million or 4.5% of sales during the quarter compared to $2.5 million or 2.7% of sales in the prior first quarter.
Net income for the quarter increased 283% to $2.6 million, or 30 cents per diluted share, compared with first quarter earnings of $0.7 million, or 8 per cents diluted share, in last year’s first quarter.
Supplemented by an additional $6.0 million in sales from the recently-acquired To The Game headwear business, sales for the Retail-Ready segment spiked 25.5% to $52.0 million.
Sales at Junkfood, driven primarily from its successful relationship with GAP, Inc., surged 48.7% from the last year’s first quarter.
Soffe sales, which anniversaried against last year’s rollout of new Navy PT uniform, slipped 6.9% as a result of lower military sales. Excluding the impact of the initial roll out, sales at Soffe would have increased by 3.1%.
Operating income in the Retail-Ready segment was $5.6 million for the first fiscal quarter of 2010, an increase of $0.1 million from the prior year first quarter.
The Activewear segment, comprised of the Delta catalog and FunTees businesses, had sales of $47.1 million for the quarter, a decrease of 5.7% compared to the prior year’s first quarter. Management said an increased per-unit revenue was offset by a decline in the number of units sold during the quarter.
The company noted that selling prices in the first quarter of the prior year were strong but declined as fiscal year 2009 progressed. Pricing on basic tees has stabilized, but remains approximately 7% lower than a year ago.
The Activewear segment had an operating loss of $1.1 million for fiscal Q1, a $1.8 million improvement from the prior year’s first quarter. Manufacturing costs improved from the prior year first quarter as the cost-savings associated with Ceiba Textiles were recognized and the production of off-quality goods was reduced.
Regarding outlook, the company reiterated its expectations for revenues to be in the range of $360 million and $380 million and earnings in the range of 80 cents to $1.00 per diluted share. DLA expects to achieve its full-year margin goal of 24%, which would represent a 250 basis point improvement over fiscal 2009.
