Delta Apparel Inc. expects its growth over the next three years to be fueled by expanding the amount of its product that is either licensed or decorated. Overall, it's targeting sales of $500 million for its fiscal 2013 year compared to its guidance of $375 million to $385 million for its fiscal year ended June 2010.
At the Cowen and Company Investor Conference, Robert Humphreys, Delta Apparel's chairman, president and CEO, noted that as early as 2003, the main product Delta sold was blank T-shirts. For fiscal 2010, about 24% of its product will be associated with a license, and about 45% will be decorated. Much of that has come from acquisitions of M.J. Soffe, Junk Food Clothing and The Game.
“When we decorate a product, we usually increase the revenue for that product by about 60%,” said Humphreys. “If it's a licensed product it's usually 100% to 200%, and if it's a branded and licensed product, it can be 300% to 600% of the sales price of just the basic undecorated tee. So that's obviously a strategy that allows us to continue to grow our revenue. And if you look at where we really are in the commodity business, that is that undecorated tee, and where it was 100% of our revenue back in 2003, it's less than 30% today.”
The company has particularly benefited from the 2008 acquisition of the headwear firm, The Game. The Game is helping Delta sell apparel into the NASCAR community as well as the outdoor community. Delta will be attending the SHOT Show for the first time in its history this year as part of that outdoor connection.
“We have learned over the last 18 months that we have a great ability to focus on the synergies and relationships in these businesses that we have acquired, and it's allowing us to sell headwear where we were previously only selling apparel and, vice versa, to sell apparel to the many relationships that our headwear grew past,” said Humphreys.
Also driving growth is new licenses. A new Disney license not only covers Junk Food graphic t-shirts but Soffe products are now selling in Disney stores. Disney headwear is also being developed.
Delta also just acquired the NBA license for its Junk Food business.
“They've had a tremendous success with the NFL, and we believe our ability to again have a vintage collection of tees tied into NBA teams and cities will be well-received with the consumers,” said Humphreys.
The Soffe business recently acquired the PGA tour license for mid-tier distribution and will also be in an additional 500 doors at Macy's this year. Soffe also has a strong men's-oriented college business at JC Penney, as well as solid juniors business at Kohl's, Humphreys noted.
