Delta Apparel’s Q1 Profits Soar on 8.4% Revenue Gain

Delta Apparel, Inc. reported sales grew 8.4% in its first quarter ended Sept. 26, to $99.1 million. The retail-ready segment reported a sales increase of 25.5%
while its activewear
segment reported a sales decline of 5.7%. Net income nearly tripled to $2.6 million,
or 30 a share, compared with first quarter earnings of
$700,000, or 8 cents, a year ago.

Gross margins increased 280
basis points to 23.9% compared to 21.1% in the prior year first
quarter. The improvement in gross margin was primarily due to a higher
mix of retail-ready sales and improved margins in the activewear
segment. Activewear gross margins improved 370 basis points from the
prior year first quarter, and were partially offset by a gross margin
decline in the retail-ready segment.

Robert W. Humphreys, chairman and chief executive officer, commented, “As we begin the new fiscal year, we continue to capitalize on the strengths of our business, including the power of our brands, creative graphic talent, strong customer relationships and diverse distribution channels, to generate top-line growth. At the same time, we are driving improved profitability by providing more of the services our customers desire, including decoration and retail packaging, while lowering our product costs through our flexible manufacturing platform. Despite the difficult and uncertain marketplace conditions, we see continued opportunities to grow sales while sustaining our profitability as the fiscal year unfolds.”

Retail-Ready Apparel

The retail-ready segment, comprised of the Soffe, Junkfood and To The Game businesses, had sales of $52.0 million, a 25.5% increase from the prior year first quarter. To The Game, our headwear company acquired during the fourth quarter of fiscal year 2009, added $6.0 million in sales in the first quarter of fiscal year 2010. Sales at Junkfood grew 48.7% from the prior year first quarter, driven primarily from its successful relationship with GAP, Inc. The additional revenue from To The Game and increased sales at Junkfood were partially offset by a 6.9% decline in revenue at Soffe resulting from lower sales to the military. The prior year first quarter revenues included additional sales to the military from the initial rollout of the new Navy PT uniform. Excluding the impact of this initial rollout, sales at Soffe would have increased by 3.1%, driven from double-digit growth in both its retail channel and sales of Intensity products. Operating income in the retail-ready segment was $5.6 million for the first fiscal quarter of 2010, an increase of $0.1 million from the prior year first quarter.

Activewear Apparel

The activewear segment, comprised of the Delta catalog and FunTees businesses, had sales of $47.1 million for the three months ended September 26, 2009, a decrease of 5.7% compared to the prior year first quarter. FunTees sales grew 1.1% from the prior year quarter as revenue per unit increased from selling a higher mix of decorated products. This increased per unit revenue was partially offset by a decline in the number of units sold during the quarter. Unit sales were flat in the Delta catalog business; however, revenue declined 8.7% as a result of lower average selling prices. Selling prices in the first quarter of the prior year were strong but declined as fiscal year 2009 progressed. Pricing on basic tees has stabilized, but remains approximately 7% lower than a year ago. The activewear segment had an operating loss of $1.1 million for the first quarter of 2010, a $1.8 million improvement from the prior year first quarter. Manufacturing costs improved from the prior year first quarter as the cost-savings associated with Ceiba Textiles were recognized and the production of off-quality goods was reduced.

Fiscal 2010 Guidance

For the 2010 fiscal year ending July 3, 2010, the company reiterates its expectations for net sales to be in the range of $360 to $380 million and earnings to be in the range of 80 cents to $1.00 per diluted share. These projected results compare to fiscal year 2009 sales of $355.2 million and earnings of $0.76 per diluted share.

While the company remains concerned about the U.S. economy, it believes it has taken into consideration the heightened risk factors associated with the current economic climate. Significant deterioration in the economy could, however, negatively impact the Company’s ability to achieve its expectations.

Humphreys concluded, “We remain excited about the future opportunities for Delta Apparel, Inc. Our management team is focused on executing our current initiatives to maximize operating performance. In addition, we continue to identify new opportunities in all key areas of our business, including brand marketing, additional license agreements, key customer targets, new product extensions and cost-savings initiatives. We are optimistic about the growth opportunities ahead of us for 2010 and beyond, and believe we are in a strong position to increase shareholder value in the future.”

Conference Call

The Company will hold a conference call with senior management to discuss the financial results at 9:00 a.m. ET today. The Company invites you to join the call by dialing (913) 312-0415. A live webcast of the conference call will be available at www.deltaapparelinc.com. Please visit the website at least 15 minutes early to register for the teleconference webcast and download any necessary software. A replay of the call will be available from October 23, 2009 through October 30,