Delta Apparel, Inc. said it expects sales to drop 39.6 percent in the third quarter ended June 27, but noted that its business strengthened over the last two months of the period.
Robert W. Humphreys, the company’s chairman and chief executive officer, commented, “The momentum we have experienced across our business segments as the third quarter progressed is encouraging and further validates Delta Apparel’s strategic advantages, including our diversification of sales channels, our broad geographic footprint, and the strong emotional connection our Salt Life and Soffe brands have with consumers. During the last few months, we have seen orders accelerating and coming from a broader base of sales channels.”
The company anticipates net sales for the third quarter of its 2020 fiscal year to be approximately $72 million, or 60 percent of net sales of $119.3 million in the prior-year period. The company’s monthly sales performance sequentially accelerated throughout the third quarter from April sales at 32 percent of prior-year levels to June sales tracking at about 90 percent of prior-year levels.
The third-quarter sales performance included 32 percent sales growth in the DTG2Go digital print business, driven by the onboarding of several new customers to the DTG2Go platform as well as additional print volume from existing customers. As previously announced, the company plans to expand its digital print business with the opening of a new integrated digital print and distribution facility in Phoenix, Arizona in August, combining DTG2Go’s digital print capabilities with Delta Apparel’s own supply of garments. The company also plans to increase its fleet of digital printers by 10 percent.
Humphreys commented, “In our DTG2Go business, the benefits and the uniqueness of our fully-integrated and diversified geographic model is building volume with existing customers while attracting new customers to our comprehensive digital print platform. We are thrilled to be in a position to continue to invest in this strong growth business which is perfectly positioned to thrive in the digital economy.”
During the third quarter, direct-to-consumer sales significantly increased for the company, including e-commerce sales that more than doubled compared to the prior year, led by sales growth of over 140 percent on the Salt Life e-commerce site and 80 percent on the Soffe consumer site.
Humphreys commented, “We have really enjoyed connecting directly with our loyal Salt Life and Soffe consumers through social media channels and on our e-commerce sites, as well as in our retail stores which have all now safely reopened. It is also promising to see net sales for the Salt Life Group return to mid-single-digit growth in the month of June, as our retail partners started to re-open their doors in the back half of the quarter.”
“The third quarter was unprecedented for our nation, our industry, and our company,” Humphreys continued. “I am so very proud of our teams across all our businesses for their unwavering dedication throughout the pandemic, and of the significant progress, we have collectively made to service our diverse customer base. While our non-U.S. manufacturing operations were closed for most of the quarter, we are encouraged that by the end of June we had resumed production at all of our manufacturing plants. In accordance with local regulations, we have implemented strict safety protocols and will operate at a reduced capacity in the near term for the safety of our employees and to align our production levels with anticipated future business.”
The company expects to record approximately $24 million of non-recurring expense during its fiscal 2020 third quarter associated with impacts from the COVID-19 pandemic. These include costs related to the curtailment of its manufacturing operations and increased reserves related to the heightened risks in the market as the U.S. continues its recovery.
Humphreys concluded, “We look forward to providing a more comprehensive review of our third-quarter results during our earnings call on Thursday, July 30, 2020. Our business is recovering much quicker than we originally anticipated, and we believe this momentum will continue, allowing us to return to profitability in our September quarter. Each month our liquidity has continued to improve, resulting in a nearly 50 percent increase in our cash on hand and availability under our credit facility at June compared to the March levels. I remain confident Delta Apparel is in a solid financial position to emerge from this pandemic stronger, and we are ready to profitably grow our business.”
Photo courtesy Delta Apparel