Delta Apparel Inc. took a $2.5 million charge in the first quarter ended December 29 in connection with the resolution of litigation stemming from The Sports Authority’s March 2016 bankruptcy. Earnings grew strongly excluding the charge as sales advanced 12.5 percent.
Robert W. Humphreys, the company’s chairman and chief executive officer, commented, “Our team delivered a strong start to the new fiscal year and we are pleased with the wide-ranging performance we saw across our business during the first quarter, including double-digit sales growth in both our Delta Group and Salt Life Group segments. The continuing expansion of our digital print business, DTG2Go, which grew over 250 percent during the quarter, and double-digit sales growth in our Salt Life lifestyle brand were key drivers in our results.”
Humphreys continued, “We believe we are well-positioned for more growth as we look to further capitalize on our industry-leading position in the digital print space, leverage our vertical manufacturing platform and increase consumer awareness of our Salt Life lifestyle brand through new product categories as well as growth with national and regional retailers and our own direct-to-consumer channels. This is an exciting time for Delta Apparel and we are extremely optimistic about our prospects going forward.”
For the first quarter ended December 29, 2018:
- Net sales were $101.7 million, up 12.5 percent from $90.3 million in the prior year first quarter. Net sales in the Delta Group, which is comprised of the company’s DTG2Go digital print business, Delta Activewear business and Soffe brand, increased 12.5 percent. Net sales in the Salt Life Group, which is comprised of the company’s Salt Life and Coast lifestyle brands, increased 13.5 percent.
- Gross profit was $18.6 million, up 13 percent from $16.4 million in the prior year first quarter. Gross margin improved 20 basis points to 18.3 percent compared to 18.1 percent in the prior year period.
- Selling, general and administrative (“SG&A”) expenses as a percentage of overall sales was 16.5 percent, generally flat with the prior year first quarter.
- Operating income was $117,000 compared to $1.7 million in the prior year first quarter, with the decrease attributable to a discrete expense of $2.5 million taken during the quarter in connection with the resolution of litigation stemming from The Sports Authority’s March 2016 bankruptcy.
- Excluding that expense, operating income was $2.6 million, up 49 percent from $1.7 million in the prior year. Delta Group segment operating income was impacted by the litigation expense and came in at $2.8 million, compared to $4.4 million in the prior year first quarter.
- Excluding that expense, Delta Group operating income improved $0.8 million, or 18.5 percent, over the prior year. Salt Life Group segment operating income was $0.4 million, up 58 percent from $0.2 million in the prior year first quarter.
- The company experienced a net loss for the quarter of $1.1 million, or $0.17 per diluted share, an improvement over the prior year first quarter’s loss of $10 million, or $1.37 per diluted share.
- Excluding the above-referenced $2.5 million litigation expense, the company achieved earnings per diluted share of 14 cents a share, a 75 percent increase over prior year earnings per share of 8 cents after excluding a discrete provisional tax expense of $10.6 million associated with United States tax reform legislation.
During the quarter, the company spent $1.8 million on capital expenditures, $12 million on the acquisition of SSI Digital Print Services, and $1.7 million to repurchase 92,000 shares of company stock.
Total debt, including capital lease financing, at quarter-end was $134 million, up $22 million from the end of the prior year first quarter due principally to the company’s recent digital print acquisitions. Total inventory at quarter-end was $187.7 million compared with $174.5 million a year ago due to more units on hand from the recent digital print acquisitions as well as higher per unit cost inventory due to inflationary cost increases.
Delta Apparel, Inc., along with its operating subsidiaries, Salt Life, LLC, M. J. Soffe, LLC, and DTG2Go, LLC, specializes in selling casual and athletic products.
Image courtesy Salt Life