Delta Apparel logged a loss in the fiscal first quarter ended December 31 due to inflationary raw material costs and production curtailment expenses. The company was impacted by reduced demand in the mass retail supply chain served by its Delta Direct channel.

Chairman and Chief Executive Officer Robert W. Humphreys commented, “We were pleased to deliver double-digit sales growth across four of our five main go-to-market channels and overall sales of $107 million for the quarter. Our Salt Life Group segment hit on all cylinders, delivering record first-quarter sales fueled by 17 percent growth over last year and strong acceleration across direct-to-consumer and wholesale channels. The Salt Life team continues to do an excellent job of expanding the brand’s retail and digital footprints to remain accessible to its loyal and growing consumer following across the country.

“Our DTG2Go business also posted record first quarter sales with growth of nearly 20 percent over last year. We continue to see high demand for DTG2Go’s ‘Digital First’ offering and many opportunities to grow sales and improve profitability as we increase output on recently adopted technology and leverage competitive advantages from ‘hyper local’ fulfillment strategies and the Delta Direct vertical blank tee platform. Our Activewear business’s Global Brands and Retail Direct channels also registered double-digit sales growth for the quarter and continue to seize opportunities generated by the increasing industry focus on nearshore sourcing solutions like those we offer in Central America.

“As expected, our results for the quarter were heavily impacted by reduced demand in the mass retail supply chain served by our Delta Direct channel and the inflationary cotton and other input costs evident across the industry. The manufacturing shutdowns that we, like many of our competitors, initiated during the quarter to recalibrate production output also impacted the bottom line.”

Humphreys concluded, “We’ve been very intentional over the years in building agility and market diversity into our business, and our topline performance nearing last year’s record first quarter sales in a much lower demand environment for basic tees this time around highlights our team’s ability to execute on that strategy. Moving forward, we look for another record year at Salt Life, continued sales growth at DTG2Go, and improving profitability at Activewear in the second half of our fiscal year.”

For The First Quarter Ended December 31, 2022
Net sales were $107.3 million in the first quarter compared to the prior year’s first quarter net sales of $110.7 million. Net sales in the Delta Group segment were $97.0 million compared to $101.9 million in the prior year’s first quarter. Salt Life Group segment net sales grew 17 percent to $10.3 million from the prior year’s first quarter net sales of $8.8 million.

Gross margins were 12.7 percent compared to 20.8 percent in the prior year, largely driven by inflationary raw material costs and production curtailment expenses.

SG&A expenses were $18.9 million, or 17.6 percent of sales, compared to $17.5 million, or 15.8 percent of sales, in the prior year’s first quarter. The year-over-year increase in SG&A was driven primarily by higher selling costs in our Salt Life Group segment from the opening of additional retail stores as well as increased distribution labor and supply costs in our Delta Group segment.

Operating income declined year-over-year from $5.9 million, or 5.3 percent of sales, to an operating loss of $2.59 million, or (2.4 percent) of sales.

Net income declined from $3.6 million, or $0.51 per diluted share, to a loss of $3.6 million, or ($0.51) per diluted share, and included a one-time $2.5 million benefit from the settlement of a litigation matter.

Net inventory as of December 31, 2022, was $258.8 million, an increase of $10.4 million from September 2022 and $75.8 million from December 2021. The increase from September 2022 stemmed primarily from timely Salt Life first-quarter inventory deliveries compared to last year’s supply chain delays pushing scheduled deliveries into the second quarter.

Total net debt, including capital lease financing and cash on hand, was $185 million as of December 31, 2022, an increase of $14.6 million from September 2022 and $46 million from December 2021. Cash on hand and availability under the company’s U.S. revolving credit facility totaled $27.2 million as of December 31, 2022, a decrease of $7.5 million from September 2022 and $5.8 million from December 2021, with the decrease from September 2022 principally driven by investments in the business to support working capital needs.

The company spent approximately $2.1 million on capital expenditures during the first quarter compared to $1.8 million during the prior year’s first quarter, with the expenditures focused on Salt Life retail store build-outs, additional equipment, and information technology and manufacturing enhancements.