Delta Apparel Inc. on Thursday reported growth across its portfolio resulted in fiscal 2019 fourth-quarter earnings of 50 cents per share, beating Wall Street’s targets by 2 cents.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “We are thrilled with our overall performance for the fourth quarter and full year. Both our Delta Group and Salt Life Group segments achieved double-digit sales growth for the quarter and drove results exceeding our expectations. We were also able to expand gross margins in the back half of the year, maintain our cost discipline, and finish the year with increasing profitability.”

Humphreys continued, “As we look ahead to fiscal 2020, we are excited to see positive momentum across our business segments. In our Delta Group, we continue to diversify our customer base across multiple channels of distribution, and our Activewear business’s entry into the full-service distributor channel in 2020 should only enhance our versatility. Our DTG2Go business turned in another extremely strong year, more than doubling its revenue, and we continue to be in a prime position to capitalize on what we see as the still largely untapped growth potential of digital printing. Our Salt Life lifestyle brand also enters the new year with good things happening in a variety of areas, and we remain very focused on expanding the brand’s direct-to-consumer strategies and partnerships with national and regional retailers.”

For the fourth quarter ended September 28, 2019:

  • Net sales were $108 million, up 16.2 percent from $92.9 million in the prior year fourth quarter. Net sales in the Delta Group segment increased 16.6 percent over the prior year period, and net sales in the Salt Life Group segment increased 12.5 percent from the prior year period.
  • Gross profit was $22.9 million, an increase of 19.5 percent compared to $19.2 million in the prior year fourth quarter. Gross margin was 21.2 percent compared to 20.6 percent in the prior year fourth quarter driven by year-over-year improvement in both the Delta Group and Salt Life Group segments.
  • Selling, general and administrative (“SG&A”) expenses as a percentage of sales improved 150 basis points to 17.1 percent, compared to 18.6 percent in the prior year fourth quarter.
  • Operating income for the quarter was $4.8 million compared to $3.5 million in the prior year fourth quarter, with the increase driven primarily by an increase of $1.6 million in the Delta Group segment.
  • Net income for the quarter was $3.5 million, or $0.50 per diluted share, compared to $3.1 million, or $0.43 per diluted share, in the prior year period.

For the full year ended September 28, 2019:

  • Net sales were $431.7 million, up 9.2 percent from $395.5 million last year. Net sales in the Delta Group segment increased 9.3 percent over the prior year and net sales in the Salt Life Group segment increased 8.1 percent over the prior year.
  • Gross profit was $85.2 million, up 3.8 percent from $82.0 million last year. Gross margin was 19.7 percent compared to 20.7 percent in the prior year period, but as expected, gross margins expanded sequentially each quarter through the year.
  • SG&A expenses as a percentage of sales improved 60 basis points to 16.3 percent, compared to 16.9 percent in the prior year period.
  • Operating income was $15.9 million compared to $17.4 million last year, with the majority of the decrease attributable to a discrete expense of $2.5 million taken during the first quarter of 2019 in connection with the resolution of litigation surrounding a 2016 customer bankruptcy. Delta Group segment operating income, which was impacted by the above-referenced litigation expense, declined $2.3 million over the prior year, while Salt Life Group segment operating income increased $1.4 million compared to the prior year due in part to the favorable settlement of a commercial litigation matter in the third quarter.
  • Net income was $8.2 million, or $1.17 per diluted share, compared to prior year net income of $1.3 million, or $0.18 per diluted share. Adjusting for the $0.31 per diluted share expense impact of the above-referenced bankruptcy litigation matter and the benefit of $0.10 per diluted share arising from the above-referenced commercial litigation settlement, net income was $1.38 per diluted share. In fiscal year 2018, after adjusting for the $1.44 per diluted share expense due to tax reform legislation, our net income was $1.62 per diluted share.

During the year, the Company spent approximately $16.2 million on capital expenditures and $2.7 million to repurchase 141,501 shares of its stock. Total debt, including capital lease financing, as of the end of fiscal year 2019 was $135.1 million, up about 20 percent from the end of the prior year due principally to the Company’s recent digital print acquisitions and distribution expansions.  Total inventory at the end of fiscal year 2019 was $179.1 million compared with $175.0 million a year ago due primarily to recent product expansions in both the Delta Group and Salt Life Group segments.