Delta Apparel Inc. reported earnings rose 38 percent in the fiscal fourth quarter ended October 2 as sales rose 5.9 percent on comparable thirteen-week quarters.
Robert W. Humphreys, company Chairman and CEO, commented, “Our fourth quarter and full-year performance, which outpaced our expectations, showcases the strength of our unique business model servicing diversified sales channels using our innovative supply chain technologies and vertically-integrated, flexible manufacturing platform. We ended the fiscal year on a positive note, with broad-based fourth quarter top-line performance and solid margin expansion. I am incredibly proud of our entire organization whose hard work has enabled us to post these extraordinary results.”
Humphreys continued, “Brand awareness and consumer engagement with Salt Life is at an all-time high, which is driving exceptional growth in our branded retail stores as well as our wholesale business. Within our Delta Group, we continue to see strong demand from brands, retailers and retail license accounts utilizing our comprehensive and diverse services. With record-level manufacturing output, we are rebuilding our inventory levels and I am confident we are poised to continue to deliver outstanding results in fiscal 2022 and beyond. We believe our solid financial position, including historically low debt leverage at only 2.5 times EBITDA, and strong cash flows allow us to fund our growth initiatives while also providing liquidity for other actions to increase shareholder value.”
For the fourth quarter ended September 2021:
- Net sales were $114.7 million compared to $116.7 million in the prior-year fourth quarter, which was a 14-week quarter. Calculated on a comparable 13-week quarter, sales increased 5.9 percent from the prior-year period, with Delta Group and Salt Life Group segments up 5.0 percent and 13.8 percent, respectively.
- Gross margin improved 170 basis points to 23.1 percent from 21.4 percent in the prior-year quarter, driven by year-over-year improvement in both the Delta Group and Salt Life Group segments.
- Selling, general and administrative (“SG&A”) expenses increased slightly from the prior-year quarter to $17.7 million, or 15.5 percent of sales. SG&A costs as a percent of sales increased year-over-year primarily from higher distribution labor costs and the prior year benefiting from favorable adjustments to credit risk reserves.
- Other income includes a $1.2 million favorable adjustment to contingent consideration associated with the fiscal year 2018 digital print acquisition. The prior-year quarter included a favorable adjustment of $0.4 million.
- Operating income was $10.1 million, a 22.6 percent improvement from the prior-year period, resulting in net income of $6.9 million, or $0.96 per diluted share, compared to $5.0 million, or $0.71 per diluted share, in the prior-year period.
Earnings were slightly above an update provided on October 28. At the same, Delta said sales were expected to climb about 6 percent over last year’s fourth quarter calculated on a comparable 13-week basis with EPS anticipated to be in the range of 91 cents to 94 cents.
For the full year ended September 2021:
- Net sales were $436.8 million, up 14.6 percent from $381.0 million in the prior fiscal year. Net sales in the Delta Group and Salt Life Group segments increased 12.5 percent and 33.9 percent, respectively, over the prior-year period.
- Gross profit increased 49 percent to $101.8 million from $68.4 million in the prior-year period, with gross margins improving 540 basis points to 23.3 percent of sales. Gross margins expanded in both business segments, with the year-over-year improvement of 500 basis points in the Delta Group and 430 basis points in the Salt Life Group.
- SG&A expenses were $70.7 million in fiscal year 2021, or 16.2 percent of sales, an improvement of 170 basis points from the prior-year period.
- Operating income was $32.8 million, or 7.5 percent of sales, record operating results for the company.
- Net income was $20.3 million, or $2.86 per diluted share.
All-time record levels of manufacturing production during fiscal year 2021, partially offset by strong demand for products, resulting in an 11.1 percent increase in inventory from a year ago. Finished goods inventory at September 2021 remains lower than optimal, but higher manufacturing production in the first half of fiscal year 2022 is expected to position the company for a strong spring 2022 selling season.
Total net debt, including capital lease financing and cash on hand, as of September 2021 was $121.7 million, consistent with the prior year. Cash on hand and availability under the company’s U.S. revolving credit facility totaled $45.3 million as of September 2021, a $2.0 million improvement from June 2021. The company remains optimistic about the broad-based opportunities for continued growth in the business and believes its future free cash flow, cash on hand, and availability under its credit facilities is sufficient to support the company’s growth initiatives while also providing liquidity for the company to repurchase its common stock pursuant to its previously announced Share Repurchase Program or take other actions as the Board of Directors may deem appropriate to increase shareholder value.
