Delta Apparel reported broad-based top-line growth and solid margin expansion in the fourth quarter ended October 2. The company’s Delta Group activewear segment began to benefit from heightened interest in onshore and nearshore supply chain strategies while its lifestyle brand, Salt Life, achieved a record-high level of customer engagement.
For the quarter, net sales were $114.7 million, a nearly 6 percent sales growth compared to the prior year on a comparable 13-week basis, with Delta Group up 5 percent and Salt Life Group up nearly 14 percent.
Gross margins expanded in both the Delta Group and Salt Life business segments, coming in overall at 23.1 percent for the quarter. The 170 basis-point higher gross margins were partially offset by slightly higher SG&A costs.
Including the $1.2 million benefit from the valuation adjustment, operating profits were $10.1 million or 8.8 percent of sales, a nearly 23 percent increase from $8.3 million, or 7.1 percent of sales, in the prior-year quarter.
Earnings improved 38.0 percent to $6.9 million, or 96 cents per share, compared to $5.0 million, or 71 cents, in the prior-year period.
For the full 2021 fiscal year, net sales increased nearly 15 percent to $436.8 million with 12.5 percent growth in the Delta Group and nearly 34 percent growth in the Salt Life Group over the prior year.
Operating income was $32.8 million, or 7.5 percent of sales, against a loss of $14.1 million a year ago. Net income came to $20.3 million, or $2.86 per share, versus a net loss of $10.6 million, or $1.53, a year ago.
Delta Group’s Custom Business Achieves Record Revenues In Fiscal 2021
Highlights for the year include completing the integration of the Soffe brand into the Activewear business and achieving a record level of manufacturing output.
The Delta Group segment has been streamlined and fully integrated and is now organized around three key sales channels: Delta Direct, Retail Direct and Global Brands.
Delta Group’s custom business achieved record sales in fiscal 2021, reaching $127 million in sales and representing 48 percent growth from fiscal year 2020 and 16 percent growth from prior record sales levels.
Deborah Merrill, Delta’s CFO, VP and treasurer, said, “We are seeing the increased desire from existing and new customers interested in using our services, leveraging our broad product capabilities, and unparalleled service levels. We are strategically building our manufacturing with additional capacity that’s coming online in the back half of fiscal 2022 that should allow us to expand our programs with existing customers and onboard new customers that we’re currently developing programs with, providing significant growth opportunities for activewear in years to come.”
Bob Humphreys, Delta’s chairman and CEO, said onshore and nearshore strategies have become an integral component of brand and retailer sourcing plans driven by many factors, including changes in trade policies; speed to market; social, environmental, and sustainability efforts; inflationary pressures; and supply chain disruptions.
“We have seen an increased desire from existing and new customers who want to use Delta Activewear as their supply chain partner,” said Humphreys. “Our Western Hemisphere manufacturing platform with its broad product capabilities, coupled with our unparalleled service levels, provides customers the diversification and confidence they desire within their supply chain.”
DTG2G, its direct-to-garment digital print and fulfillment business, suffered a sales decline of about $5 million as its core e-retailer customers were challenged by many changes in social media policies and, most significantly, Apple’S iOS changes. The changes Apple made in iOS 14.5, including asking people if they wanted to opt-out of apps tracking, has caused significant challenges for businesses relying on Facebook ads.
However, Merrill said the investments to ensure digital graphic prints meet the high-quality standards required for brands, retailers, and IP holders are expected to broaden the opportunity for DTG2G in the years ahead.
“Our business started with e-retailers, the early adopters of digital print,” said Merrill. “Over the last several years, we have worked diligently to expand the sales channels that digital print services. We have been saying that the big unlock of expanding the on-demand market was achieving the retail quality and servicing standards making on-demand products indistinguishable from traditional products. We have made this breakthrough. And in the coming months, we’ll be excited to share with you the many new customers that we are launching on this elevated platform, including some of the largest IP holders in the market.”
Salt Life Benefits From DTC Expansion
iSalt Life reached a milestone in fiscal 2021 with 32 percent of its sales representing DTC (direct-to-consumer). Of this, over $10 million came from its 13 branded retail doors with same-store sales expanding 19 percent in the fourth quarter. Seven to eight new stores are expected to open in fiscal 2022 across Florida, South Carolina, and Alabama and new stores are planned to open at a rate of eight or nine annually over the next several years.
“Our marketing efforts designed to elevate the Salt Life brand appeal and drive increased engagement is paying off,” added Humphreys.
The Salt Life YouTube channel reached 5.2 million views in fiscal 2021 and saw a 42 percent increase in the number of minutes watched. Beyond YouTube, Salt Life’s social channel engagement grew nearly 90 percent in fiscal 2021, spanning Facebook, Instagram and TikTok.
Merrill said Salt Life’s DTC business also lifts its wholesale revenues as consumers seek out Salt Life while shopping at department stores, outdoor retailers, resort shops, and specialty stores.
“We are seeing record level pre-books for spring and summer 2022 products with indications that the same will be true for fall 2022,” said Merrill. “The increase is broad-based with most wholesale customers booking stronger orders across the array of lifestyle products with notable growth in our ladies’ line, a strong indication the brand is successfully expanding overall appeal. With the strength of the wholesale business and the growth we’re experiencing in our direct-to-consumer channels, we’re extremely excited about Salt Life’s growth potential in fiscal 2022 and beyond.”
In the Q&A session, Merrill said Delta has taken price actions over the last fiscal year to get ahead of the current “hyperinflation” that’s being seen in raw materials, including cotton, yarn prices, dyes and chemicals; as well as with freight and labor costs. Further price increases were introduced at the beginning of October.
Merrill said, “While it’s challenging for everybody, we are keeping a close eye on the market and on opportunities for us to find ways with our customers to reduce any non-value-added cost in the supply chain so that we’re working together and partnering together to remove any cost that we can to benefit both of us, while also operating throughout these times until we see things adjust in the overall global economy.”
Photo courtesy Salt Life