Delta Apparel, Inc. reported profits grew over 130 percent in the fiscal 2022 second quarter ended April 2. Sales grew 21 percent.
Robert W. Humphreys, company chairman and CEO, commented, “We delivered strong second quarter results that met the high end of our expectations and reached a second quarter record for our company with sales surpassing $131 million. Our bottom line results were also impressive, with diluted EPS of $1.44, up over 130 percent from the prior year’s second quarter. In addition, our operating margin improved 380 basis points from the prior year. The continued strength in current year results reflects strong performance across both our Delta and Salt Life business segments. Significant growth in our Delta group segment was achieved through unit sales growth, increased value-added services, and our continued ability to update our pricing in the marketplace to offset higher input costs. Salt Life’s outstanding performance was fueled by a healthy combination of retail growth and strong wholesale channel demand.”
Humphreys continued, “Our five focused go-to-market strategies and vertical supply chain are enjoying strong demand across all the channels we serve. We continue to see the results of our investments, with increased manufacturing capacity throughout our production network resulting in higher unit growth in our Delta business segment. Within the Salt Life segment, we have increased the number of retail stores to 18 locations across 6 states, and we are on track to achieving our target of at least 20 retail stores opened by the end of fiscal 2022. Additionally, we have continued to see strong wholesale demand and consumer interest in our e-commerce channel.”
“I am continuously impressed by the resiliency of our organization and the strong financial performance we have seen as a company while faced with labor shortages, inflationary pressures, and supply chain disruption. We are meeting our internal goals and are positioned well financially to further invest in our growth while providing cash-flows for other strategic initiatives,” concluded Humphreys.
Second Quarter Ended April 2, 2022
Net sales were $131.7 million in the second quarter of fiscal 2022, representing an increase of 21 percent compared to the prior year’s second quarter net sales of $108.6 million. Net sales in the Delta Group segment grew 22 percent to $115.3 million compared to $94.2 million in the second fiscal quarter of the prior year. Salt Life segment net sales grew 14 percent from the second quarter of the prior year to $16.4 million.
In an update on April 12, Delta Apparel said sales were expected to be approximately $130 million, representing a 20 percnt increase.
On a consolidated basis, gross margins were 25.5 percent, improving 270 basis points from 22.8 percent in the prior year, which was ahead of expectations and largely driven by increased selling prices and production efficiencies.
Selling, general, and administrative expenses (SG&A) were $19.7 million, or 15.0 percent of sales, compared to $17.1 million, or 15.7 percent of sales, in the prior year’s second quarter. The increase in SG&A expenses of $2.6 million compared to the prior year’s second quarter was driven by higher variable selling costs. SG&A benefited from leveraging fixed costs against higher sales in the second quarter as compared to the second quarter in the prior fiscal year.
Operating income increased to $14.3 million, or 10.9 percent of sales, compared to the prior year’s second quarter profit of $7.6 million, or 7.0 percent of sales.
Net income was $10.1 million, or $1.44 per diluted share, representing an increase of over 130 percent compared to $4.4 million, or $0.62 per diluted share for the same period in the prior year driven by higher operating profits and a lower tax rate.
Net inventory as of March 2022 was $197.7 million, reflecting an increase of $14.6 million from December 2021 and $49.2 million from March 2021. The improved inventory levels reflect increased production during the past year as the company reached record manufacturing output.
Total net debt, including capital lease financing and cash on hand, was $153.3 million at March 2022, depicting an increase of $13.8 million from December 2021. Cash on hand and availability under the company’s U.S. revolving credit facility totaled $35.1 million at March 2022, representing a $2.2 million increase from December 2021.
The company spent approximately $10.5 million on capital expenditures during the second quarter of fiscal 2022 compared to $1.5 million during the prior year’s second quarter due to continuing investment in digital print equipment and direct-to-consumer investment including Salt Life retail store openings.
Share Repurchase Program
In the second quarter of fiscal 2022, under the previously announced share repurchase program, the company repurchased 28,015 shares for $0.8 million, bringing the total amount repurchased to $55.5 million. At the end of the second quarter of fiscal 2022, the company had $4.5 million of remaining repurchase capacity under its existing authorization.
Photo courtesy Delta Apparel/Salt Life
