If You’re Delta Apparel, Junkfood Can Be Healthy…

Delta Apparel saw the acquisition of Junkfood Clothing help to boost sales in the company’s fiscal first quarter ended October 1, benefiting from the acquisition of the brand half-way through the quarter. The company also underwent a bit of restructuring in regards to its reporting arrangement, shifting the Delta business into an Activewear segment and Soffe and Junkfood into a Retail-Ready segment.

For the Activewear segment, sales were down just over 10%, which management attributed to the loss of the final distributor, to disruptions in manufacturing caused by Katrina and Rita, to slow sales in long-sleeve t-shirts as a result of warm weather, and to the fact that the 2004 quarter had the largest quarterly sales ever posted by Delta, with the most recent quarter coming in second. Margins were up on less expensive raw materials and lower manufacturing costs, but were partially offset by higher SG&A costs attributed to higher distribution costs associated with the addition of the New Jersey distribution center that opened in last year's third quarter, higher management incentive costs associated with the improved operating results, and the expensing of stock options. Operating profit for the segment benefited from the margin improvements to more than double over last year.

For the Retail-Ready segment, sales jumped 45.4%, courtesy of the acquisition of Junkfood Clothing six weeks into the period. Sales for Junkfood were $6.5 million for the period, up from just over $1 million for the same period last year. The sales increase for the business was attributed to both an increase in doors and in volume at those doors. The Soffe business also contributed to the sales gain through increased orders and “strong demand” for fall product.

Looking ahead, DLA expects sales for the fiscal second quarter in the $54 million to $58 million range and basic earnings in the 26 cents to 30 cents per share range, as compared with last year’s sales of $49.2 million and basic earnings of 14 cents per share. For fiscal 2006, sales are still seen in the $265 million to $275 million range, but basic EPS is now esimated to be in the $1.71 to $1.80 per share range, a four cents per share increase from the previously announced fiscal 2006 basic earnings guidance of $1.67 to $1.76 per share.