Delta Apparel, Inc. expects third quarter fiscal 2008 revenue to be approximately $75 million and expects a loss per diluted share in the range of 5 cents to 7 cents, inclusive of approximately 7 cents of textile restructuring charges per diluted share. These restructuring costs are expected to be the final charges relating to the companys previously announced textile restructuring plan. These preliminary results compare to the companys prior expectation of third quarter revenues between $84 million to $88 million and diluted earnings per share in the range of 25 cents to 29 cents.
Although sales in the retail-ready segment increased from the prior year third quarter, the company did not achieve its original revenue targets for this segment due primarily to the overall slowdown of consumer demand for apparel. As a result of the high margin contribution from this segment, the modest sales shortfall to expectations disproportionately reduced the companys third quarter profitability. At the same time, sales in the activewear segment were lower than in the prior year quarter and were also below expectations for both the catalog and private label channels. While the company believes that it is servicing its private label customers well, weakness in consumer spending is slowing the callouts of these products. In addition, overall weak demand combined with higher energy, transportation and raw material costs are creating a difficult marketplace for undecorated tees.
Robert W. Humphreys, president and CEO, commented “Although we are not meeting our expectations and are not satisfied with our performance, we did see steady progress towards profitability throughout the third quarter. This quarter should finalize the previously discussed restructuring related charges. Excluding these textile restructuring costs, our quarterly performance would have been break-even despite the tough retail environment. While the sell-through of our Soffe product line remains solid across its channels of distribution, several retailers have been more conservative with their level of reorders compared with previous seasons due to the overall softness in consumer spending. Our Junkfood business continues to grow within its traditional market of boutiques, high-end department stores and foreign customers. Our partnership with GapKids is expanding with shipments to more doors. In April we expect to ship our first orders to BabyGap and have additional joint-branded Junkfood/Gap marketing initiatives planned.”
Mr. Humphreys continued, “In our activewear segment we are also seeing our customers take a more cautious approach with their orders due to weakness in consumer spending and a slowdown in the release of orders from retailers. While pricing is moving up on basic tees, these increases are being offset by higher cotton, energy and transportation costs. We are satisfied that our new Honduran textile facility is on-track with its production levels and expect the savings from this facility will improve our results as we begin our new fiscal year.”
For fiscal 2008, revenues are now expected to range from $305 million to $315 million with diluted loss per share from 16 cents to 10 cents, inclusive of approximately 39 cents per share of textile restructuring related charges. The company remains concerned about the general slowdown of the U.S. economy and consumer demand for apparel. Further deterioration in the economy and retail marketplace may negatively impact the companys results of operations.
Mr. Humphreys concluded, “Despite our revised outlook for 2008, we are completing a number of initiatives that we believe will improve the long-term prospects for our business. We remain committed to executing our strategy, which we believe will allow us to deliver top-line growth, improve profitability, and increase shareholder value in the future.”