Delta Apparel Inc. reported earnings tripled in the second quarter ending April 3 on a 12 percent sales gain.
Robert W. Humphreys, Chairman and CEO, commented, “In every aspect, our March quarter results showcase the positive trajectory of the company. With double-digit sales growth and significant profitability expansion in both business segments, we have proven the benefits of our broad customer base and diversified channels of distribution. We believe the momentum is just beginning, and we are excited by the many opportunities we see for continued growth. Consumers are demonstrating their deep emotional connection to the Salt Life brand, resulting in strong growth in all channels of distribution.”
Humphreys continued, “Our innovative technology in the on-demand, digital print market is transforming the retail and e-commerce supply chain for decorated apparel. Through our new, exclusive partnership with Autoscale.ai, DTG2Go will provide automated solutions for design creation, art and licensing management and marketing spend along with seamless connectivity with various online marketplaces, further solidifying our leadership position in this market segment. Supported by our vertically integrated, flexible manufacturing platform, broad distribution and fulfillment network, and strong business systems with unique proprietary technology, we believe we are well-positioned to continue to deliver the compelling top and bottom-line results for our shareholders.”
For Second Quarter Ended March 2021
- Net sales were $108.6 million, an increase of 12 percent from $96.7 million in the prior-year second quarter. Net sales in the Delta Group segment grew 12 percent driven by the demand in the market for activewear apparel, particularly in its direct-to-retail and brand-direct channels, which grew over 40 percent compared to the prior year. Net sales in its Salt Life Group segment increased 16 percent with notable performance in its direct-to-consumer channels, with sales growth of over 175 percent and 40 percent at the company’s branded retail stores and saltlife.com site, respectively.
- Gross profit was $24.8 million, a 21 percent increase from $20.6 million in the prior year second quarter. Gross margin improved 150 basis points to 22.8 percent versus 21.3 percent in the prior year and 21.4 percent in the December 2020 quarter driven by favorable product mix, selling price increases and manufacturing efficiencies and process improvements.
- Selling, general and administrative (“SG&A”) expenses were $17.1 million, or 15.7 percent of sales, in the March 2021 quarter compared to $17.9 million, or 18.5 percent of sales, in the prior year second quarter. The improved results are from spending and cost controls and integration efficiencies in the Delta Group segment, which more than offset the additional costs incurred in the consolidation of Soffe products into our new Phoenix distribution facility.
- Operating income in the March 2021 quarter was $7.6 million, which was more than double the prior year’s second-quarter income of $3.6 million. The expanded operating profit was driven by the sales growth, favorable gross margins, continuing cost controls, and $1.9 million of plant curtailment costs in the prior year.
- Net earnings for the quarter were $4.4 million, or $0.62 per diluted share, compared to $1.3 million, or $0.19 per diluted share, in the prior year period. Excluding the $1.9 million pre-tax, or $0.20 per diluted share, of plant curtailment expenses in the prior year quarter, adjusted net earnings per diluted share for the second quarter fiscal 2020 were $0.39.
- Total inventory as of March 2021 was $148.5 million, down $49 million, or approximately 25 percent from a year ago. The strong sales in the first six months, along with the temporary hurricane disruptions during the December 2020 quarter, slowed the normal seasonal build of inventory during the quarter. The company has increased production during the March 2021 quarter and is now producing at all-time record levels to support demand in the marketplace for its products.
- Total net debt, including capital lease financing and cash on hand, increased $5 million from December 2020 to $135.2 million as of March 2021, representing a $23 million decrease from net debt levels a year ago. Cash on hand and availability under the company’s U.S. revolving credit facility totaled $44.2 million as of March 2021, a $0.5 million increase from December 2020 and a $14 million, or approximately 50 percent increase, from March 2020.
Photo courtesy Delta Apparel