Delta Apparel, Inc. again counted on MJ Soffe for most of its sales increase — and just about all of its operating income — for the fiscal first quarter ended October 2, posting a 94.2% increase in net income for the quarter to $1.1 million, or 34 cents per diluted share, versus net income of $589,000, or 14 cents per diluted share, in the year-ago quarter. Consolidated net sales increased 76.3% to $54.3 million from $30.8 million in fiscal Q1 last year.
The Soffe business contributed $22.0 million in sales and $3.1 million in operating income during the quarter. Soffe exceeded its sales expectations in its military distribution channel and expects the strong sales in this channel to continue through the fiscal year.
Excluding Soffe, Delta sales would have only increased 8.5% and operating income declined 96.3% to just $9,000. Soffe also helped improve the overall gross margin by 800 basis points to 21.3% of sales versus just 13.3% of sales in fiscal Q1 last year.
The Delta apparel business reported sales of $33.4 million in Q1 2003.
The improvement in gross margin was primarily the result of the higher gross margins associated with the Soffe branded apparel business, offset partially by lower gross margins in the basic tee shirt business. The gross margins on basic tee shirts declined in the first fiscal quarter compared to the prior year quarter principally due to higher raw material costs.
Inventories increased 90.1% to $105.9 million at quarter-end versus $55.7 million at quarter-end last year. The M. J. Soffe acquisition resulted in an increase of $52.7 million in inventory compared to the prior year. The increase in inventory in the Delta business is primarily the result of the higher raw material prices in inventory.
