Delta Apparel, Inc. net sales dipped 0.6% to $104.7 million for the fiscal fourth quarter ended June 27. The addition of headwear sales through the recently acquired To The Game business contributed $6.8 million in sales. This increase in sales was offset by a 12.9% sales decline in the remaining businesses within the retail-ready segment and a 1.7% sales decline in the activewear segment.
Fourth quarter gross margins were 23.2% of sales compared to 23.9% of sales in the prior year fourth quarter. Net income for the current year fourth quarter was $4.0 million, or 47 cents per diluted share, compared to net income of $4.3 million, or 50 cents per diluted share, for the prior year fourth quarter.
The companys results for the fiscal 2009 fourth quarter include the operations of To The Game, which was acquired on March 27, 2009 and are included in the retail-ready segment of the company.
Fiscal Year 2009 Results
Fiscal year 2009 net sales increased 10.3% to a record $355.2 million compared to $322.0 million for the prior fiscal year. The sales increase was driven by organic growth in each of the companys four business units as well as the acquisition of To The Game. Gross margin for the year ended June 27, 2009 increased to 21.5% from 20.1% for the prior fiscal year. For fiscal year 2009, the company reported net income of $6.5 million, or 76 cents per diluted share, compared to a fiscal year 2008 net loss of $0.5 million, or (6 cents) per diluted share, which included a (39 cents) per diluted share impact from restructuring related charges.
Robert W. Humphreys, the companys President and Chief Executive Officer, commented, “In fiscal year 2009 we demonstrated the effectiveness of participating in diverse apparel markets, resulting in strong financial and strategic accomplishments. We are proud to have achieved organic sales growth in each of our business units which contributed to our overall double digit sales increase and solid earnings for the full year. We believe the strength of our brands, expanding license agreements, creative graphic talent, and unique manufacturing and distribution capabilities continue to separate us from our competition and are building market share. At the same time, the acquisition of The Game® and Kudzu® brands, which we completed early in the fourth quarter, provides us an entrée into new markets and gives us additional platforms for growth in the future. Finally, we continued to enhance our manufacturing efficiency through further consolidation of our factories as well as upgrades to systems and procedures that should result in improved profitability in the future.”
Retail-Ready Apparel
The retail-ready segment, comprised of the Soffe, Junkfood and To The Game businesses, had sales of $50.0 million, consistent with prior year fourth quarter sales. Excluding revenue from To The Game, sales decreased 12.9% as consumer spending remained weak and retailers limited their open-to-buy dollars to reduce their inventory risk. Sales at Soffe declined in its military business, as the prior year included sales from the introduction of the new Navy PT uniform, which resulted in a spike in military sales in the fourth fiscal quarter of 2008. Operating income in the retail-ready segment was $6.4 million for the fourth fiscal quarter of 2009, a decline of $3.0 million from the prior year fourth quarter due primarily to the lower sales and deleveraged fixed costs in the businesses.
Activewear Apparel
The activewear segment, comprised of the Delta and FunTees businesses, reported sales of $54.8 million for the three months ended June 27, 2009, a decrease of 1.7% compared to the prior year fourth quarter. Sales in the FunTees business increased 17.5%, driven principally from increased full-package programs with existing customers. Sales of the Delta basic tees decreased 10.2% during the fourth quarter primarily from lower average prices on basic tees. Unit sales in the Delta business declined 3.4% with average selling prices down approximately 7%. The activewear segment had an operating loss of $0.5 million for the fourth quarter of 2009, compared to an operating loss of $1.8 million in the prior year fourth quarter. The improved results were due primarily to improved manufacturing costs and lower raw material and transportation expenses.
Fiscal 2010 Guidance
For the 2010 fiscal year ending July 3, 2010, the company expects net sales to be in the range of $360 to $380 million and earnings to be in the range of $0.80 to $1.00 per diluted share. This compares to fiscal year 2009 sales of $355.2 million and earnings of 76 cents per diluted share.
The company remains concerned about the U.S. economy and slowing consumer demand for apparel. In determining its expectations for the upcoming year, the company believes it has taken into consideration the heightened risk factors associated with the current economic climate; however, significant further deterioration in the economy may negatively impact the companys ability to achieve its expectations.
Mr. Humphreys concluded, “As fiscal year 2010 begins, we are excited about the future of Delta Apparel, Inc. During fiscal year 2009 we completed several strategic marketing and operational initiatives that drove organic growth and improved profitability. Through fiscal year 2010 we will continue to focus on maximizing our operating performance in all key areas of our business. We are optimistic about our growth opportunities for 2010 and believe our initiatives will continue to build greater value for our shareholders in the future.”
