Delta Apparel Posts Sees Decline in Net Income Despite Rise in Net Sales

Gross margins grew 20 basis points to 24.0% of sales in the first quarter, primarily due to higher margins in the company’s Activewear segment. According to Bob Humphreys, chairman and CEO of Delta Apparel, “We started fiscal year 2011 with further organic sales growth in what remains a difficult retail environment. This is our third consecutive September quarter of organic growth which has occurred in a period of overall market contraction.”

In a conference call with analysts, Humphreys added “To some degree, customers have been taking a wait and see attitude about purchasing products at higher prices, due to recent raw material price increases, and uncertain consumer demands. “

By business segment, the Retail-Ready segment, which consists of the Soffe, Junkfood, To The Game and Art Gun businesses, showed continued strength by posting sales of $58.4 million, up 12.3% from $52.0 million in the prior-year quarter.

The sales growth resulted from revenue in The Cotton Exchange, which was acquired during the first quarter of fiscal year 2011, partially offset by a 1.1% organic sales decline. The slight sales decline was driven from lower sales of licensed graphic tees and fleece products, partially offset by strong sales of the company's exclusively-licensed outdoor brands, Realtree Outfitters and Realtree Outfitters by The Game.

Gross margins in the Retail-Ready segment were 35.2% of sales in the first quarter of fiscal year 2011 compared with 38.3% of sales in the prior-year quarter. The decline in gross margins was driven from a shift in sales mix by distribution channel.

The Activewear segment saw first quarter sales improve 5.1% to $49.5 million, driven by increased sales in catalog and private label products. Gross margins in the segment improved 300 basis points to 10.9% of sales in the first quarter.