Delta Apparel Fiscal 2021 Second Quarter Results Surpass Expectations

Rhea-AI Summary

Delta Apparel, Inc. (DLA) reported strong Q2 results for the period ending April 3, 2021, with net sales of $108.6 million, a 12% increase year-over-year. The Delta Group segment saw sales rise 12%, while the Salt Life Group surged 16%, driven by a 175% increase in direct-to-consumer channels. Gross profit grew 21% to $24.8 million, with gross margin at 22.8%. Net earnings reached $4.4 million or $0.62 per diluted share, up from $1.3 million a year ago. The company also achieved a 25% reduction in inventory.

Positive

• Net sales increased by 12% year-over-year to $108.6 million.
• Gross profit rose 21% to $24.8 million with gross margin at 22.8%.
• Net earnings improved to $4.4 million, up from $1.3 million last year.
• Inventory decreased by approximately 25%, down to $148.5 million.

Negative

• None.

Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced stronger than expected financial results for its second quarter ended April 3, 2021.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “In every aspect, our March quarter results showcase the positive trajectory of the Company. With double-digit sales growth and significant profitability expansion in both business segments, we have proven the benefits of our broad customer base and diversified channels of distribution. We believe the momentum is just beginning, and we are excited by the many opportunities we see for continued growth. Consumers are demonstrating their deep emotional connection to the Salt Life brand, resulting in strong growth in all channels of distribution.”

Humphreys continued, “Our innovative technology in the on-demand, digital print market is transforming the retail and ecommerce supply chain for decorated apparel. Through our new, exclusive partnership with Autoscale.ai, DTG2Go will provide automated solutions for design creation, art and licensing management, and marketing spend, along with seamless connectivity with various online marketplaces, further solidifying our leadership position in this market segment. Supported by our vertically-integrated, flexible manufacturing platform, broad distribution and fulfillment network, and strong business systems with unique proprietary technology, we believe we are well-positioned to continue to deliver compelling top and bottom line results for our shareholders.”

For the second quarter ended March 2021:

• Net sales were $108.6 million, an increase of 12% from $96.7 million in the prior year second quarter. Net sales in the Delta Group segment grew 12% driven by the demand in the market for activewear apparel, particularly in our direct-to-retail and brand-direct channels, which grew over 40% compared to prior year. Net sales in the Salt Life Group segment increased 16% with notable performance in our direct-to-consumer channels, with sales growth of over 175% and 40% at our branded retail stores and saltlife.com site, respectively.
• Gross profit was $24.8 million, a 21% increase from $20.6 million in the prior year second quarter. Gross margin improved 150 basis points to 22.8% versus 21.3% in the prior year and 21.4% in the December 2020 quarter driven by favorable product mix, selling price increases, and manufacturing efficiencies and process improvements.
• Selling, general and administrative ("SG&A") expenses were $17.1 million, or 15.7% of sales, in the March 2021 quarter compared to $17.9 million, or 18.5% of sales, in the prior year second quarter. The improved results are from spending and cost controls, as well as integration efficiencies in the Delta Group segment, which more than offset the additional costs incurred in the consolidation of Soffe products into our new Phoenix distribution facility.
• Operating income in the March 2021 quarter was $7.6 million, which was more than double the prior year second quarter income of $3.6 million. The expanded operating profit was driven by the sales growth, favorable gross margins, continuing cost controls, and $1.9 million of plant curtailment costs in the prior year.
• Net earnings for the quarter were $4.4 million, or $0.62 per diluted share, compared to $1.3 million, or $0.19 per diluted share, in the prior year period. Excluding the $1.9 million pre-tax, or $0.20 per diluted share, of plant curtailment expenses in the prior year quarter, adjusted net earnings per diluted share for the second quarter fiscal 2020 were $0.39.

Total inventory as of March 2021 was $148.5 million, down $49 million, or approximately 25% from a year ago. The strong sales in the first six months, along with the temporary hurricane disruptions during the December 2020 quarter, slowed the normal seasonal build of inventory during the quarter. The Company has increased production during the March 2021 quarter and is now producing at all-time record levels to support demand in the marketplace for its products.

Total net debt, including capital lease financing and cash on hand, increased $5 million from December 2020 to $135.2 million as of March 2021, representing a $23 million decrease from net debt levels a year ago. Cash on hand and availability under the Company’s U.S. revolving credit facility totaled $44.2 million as of March 2021, a $0.5 million increase from December 2020 and a $14 million, or approximately 50% increase, from March 2020.

Conference Call

The Company will hold a conference call with senior management to discuss its financial results today at 4:30 PM ET. The Company invites you to join the call by dialing 800-430-8332. If calling from outside the United States, please dial 323-289-6581. A live webcast of the conference call will be available at www.deltaapparelinc.com. Please visit the website at least 15 minutes early to register for the teleconference webcast and download any necessary software. A replay of the call will be available through June 6, 2021. To access the telephone replay, participants should dial toll-free 844-512-2921. International callers can dial 412-317-6671. The access code for the replay is 3070922.

About Delta Apparel, Inc.

Delta Apparel, Inc., along with its operating subsidiaries, DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, COAST®, Soffe®, and Delta. The Company is a market leader in the on-demand, digital print and fulfillment industry, bringing DTG2Go’s proprietary technology and innovation to the supply chain of its customers. The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business digital platform. The Company’s products are also made available direct-to-consumer on its ecommerce sites at www.saltlife.com, www.coastapparel.com, www.soffe.com and www.deltaapparel.com as well as through its branded retail stores. The Company’s operations are located throughout the United States, Honduras, El Salvador, and Mexico, and it employs approximately 7,900 people worldwide. Additional information about the Company is available at www.deltaapparelinc.com.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain “forward-looking” statements that involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, the general U.S. and international economic conditions; the COVID-19 pandemic impact on our operations, financial condition, liquidity, and capital investments; significant interruptions within our manufacturing or distribution facilities or other operations; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; the volatility and uncertainty of cotton and other raw material prices and availability; competitive conditions in the apparel industry; restrictions on our ability to borrow capital or service our indebtedness; changing consumer preferences or trends; our ability to successfully open and operate new retail stores; changes in economic, political or social stability at our offshore locations; our ability to attract and retain key management; significant changes in our effective tax rate; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; the volatility and uncertainty of energy, fuel and other costs; material disruptions in our information systems; compromises of our data security; significant litigation in either domestic or international jurisdictions; recalls, claims and negative publicity associated with product liability issues; the ability to protect our trademarks and other intellectual property; and the other factors set forth in the "Risk Factors" contained in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and as updated in our subsequently filed Quarterly Reports on Form 10-Q. Except as may be required by law, Delta Apparel, Inc. expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)
	Three Months Ended								Six Months Ended
	March 2021				March 2020				March 2021				March 2020
Net Sales	$	108,626			$	96,660			$	203,349			$	192,550
Cost of Goods Sold		83,816				76,079				158,250				152,075
Gross Profit		24,810				20,581				45,099				40,475
Selling, General and Administrative Expenses		17,061				17,850				33,091				35,924
Other Loss (Income), Net		170				(823	)			1,360				(1,640	)
Operating Income		7,579				3,554				10,648				6,191
Interest Expense, Net		1,837				1,808				3,491				3,610
Earnings Before Provision For Income Taxes		5,742				1,746				7,157				2,581
Provision For Income Taxes		1,441				526				2,013				570
Consolidated Net Earnings		4,301				1,220				5,144				2,011
Net Loss Attributable to Non-Controlling Interest		97				91				137				223
Net Earnings Attributable to Shareholders	$	4,398			$	1,311			$	5,281			$	2,234
Weighted Average Shares Outstanding
Basic		6,975				6,957				6,947				6,953
Diluted		7,105				7,055				7,052				7,063
Net Earnings per Common Share
Basic	$	0.63			$	0.19			$	0.76			$	0.32
Diluted	$	0.62			$	0.19			$	0.75			$	0.32
	March 2021				September 2020				March 2020
Current Assets
Cash	$	12,551			$	16,458			$	9,568
Receivables, Net		66,487				61,000				59,407
Income Tax Receivable		-				983				-
Inventories, Net		148,530				145,515				197,333
Prepaids and Other Assets		4,351				2,812				4,072
Total Current Assets		231,919				226,768				270,380
Noncurrent Assets
Property, Plant & Equipment, Net		66,207				63,950				62,587
Goodwill and Other Intangibles, Net		57,059				57,845				58,631
Deferred Income Taxes		3,226				4,052				1,514
Operating Lease Assets		49,570				54,645				43,226
Investment in Joint Venture		10,742				10,573				10,309
Other Noncurrent Assets		2,142				2,398				2,484
Total Noncurrent Assets		188,946				193,463				178,751
Total Assets	$	420,865			$	420,231			$	449,131
Current Liabilities
Accounts Payable and Accrued Expenses	$	63,352			$	69,974			$	71,055
Income Taxes Payable		496				379				-
Current Portion of Finance Leases		7,256				6,956				6,965
Current Portion of Operating Leases		8,946				9,039				8,525
Current Portion of Long-Term Debt		7,536				7,559				7,577
Current Portion of Contingent Consideration		2,400				2,120				1,970
Total Current Liabilities		89,986				96,027				96,092
Noncurrent Liabilities
Long-Term Taxes Payable		3,220				3,599				3,585
Long-Term Finance Leases		18,552				11,328				12,239
Long-Term Operating Leases		42,377				46,570				35,611
Long-Term Debt		114,375				112,782				141,088
Long-Term Contingent Consideration		1,910				4,300				3,610
Other Noncurrent Liabilities		2,470				2,939				3,269
Total Noncurrent Liabilities		182,904				181,518				199,402
Common Stock		96				96				96
Additional Paid-In Capital		59,842				61,005				59,442
Equity Attributable to Non-Controlling Interest		(661	)			(524	)			(504	)
Retained Earnings		131,845				126,564				139,168
Accumulated Other Comprehensive Loss		(998	)			(1,322	)			(1,432	)
Treasury Stock		(42,149	)			(43,133	)			(43,133	)
Total Equity		147,975				142,686				153,637
Total Liabilities and Equity	$	420,865			$	420,231			$	449,131

 

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FAQ

What were Delta Apparel's Q2 earnings results for 2021?

Delta Apparel reported net sales of $108.6 million, a 12% increase from the prior year, with net earnings of $4.4 million or $0.62 per diluted share.

How much did Delta Apparel's sales increase in the Salt Life Group segment in Q2 2021?

The Salt Life Group segment experienced a 16% increase in sales.

What is Delta Apparel's stock symbol?

Delta Apparel's stock symbol is DLA.

What were Delta Apparel's gross profit and margin for Q2 2021?

The gross profit for Q2 2021 was $24.8 million, with a gross margin of 22.8%.

How did Delta Apparel's inventory change in Q2 2021?

Delta Apparel's inventory decreased by approximately 25%, bringing the total down to $148.5 million.