Delta Apparel Reports Second Quarter Fiscal 2023 Results
- Delta Apparel reports double-digit sales growth in Q2 2023, driven by Salt Life and DTG2Go businesses. Salt Life achieves record sales and profitability, expands license portfolio. DTG2Go sees nearly 20% topline expansion.
- Gross margins declined to 14.7% from 25.5% due to production curtailments and inflationary costs. Operating income declined from $14.3 million to a loss of $5.4 million. Net income declined from $10.1 million to a loss of $7.0 million. Total net debt increased to $194.3 million.
Record Sales Pace and Double-Digit Growth at Salt Life and DTG2Go Continue
Chairman and Chief Executive Officer Robert W. Humphreys commented, “Our second quarter performance highlights the durability and inherent advantages in our multi-market strategy during uneven demand cycles. We achieved double-digit sales growth across three of our five go-to-market channels and saw strength in areas where we provide decorated ‘consumer ready’ products directly to end-users or close to the point-of-sale.
Our Salt Life business continues to capitalize on the growing popularity of its lifestyle brand domestically and internationally, achieving both record sales and profitability during the quarter. The growth at Salt Life included double-digit increases across its branded retail and eCommerce channels as well as healthy growth at wholesale. Salt Life also expanded the scope of its license portfolio through a new partnership in the multi-billion-dollar home furnishings market that we expect to generate significant future royalty revenue.
Our DTG2Go business also continued its high growth trend during the quarter with nearly
The apparel markets remain dynamic. As expected, our Delta Direct and Global Brands channels were impacted by the well-publicized high inventory levels and associated slower demand in the supply chains they serve, while our Retail Direct channel saw double-digit sales growth in the quarter.
Mr. Humphreys concluded, “We remain keenly focused on managing our working capital, reducing inventory and debt levels, and leveraging the many opportunities across our business to provide higher-margin and quicker-turn ‘consumer ready’ products. Executing on these initiatives and working through the remainder of last year’s high-price cotton inventory sets the stage for improved operating results as we move through the second half of our fiscal year and positions us to capitalize on accelerations in demand.”
For the second quarter ended April 1, 2023:
-
Net sales were
compared to prior year second quarter net sales of$110.3 million . Salt Life Group segment net sales grew over$131.7 million 16% to from prior year second quarter net sales of$19.0 million . Net sales in the Delta Group segment were$16.4 million compared to$91.3 million in the prior year second quarter.$115.3 million
-
Gross margins were
14.7% compared to25.5% in the prior year, driven by production curtailments intended to match manufacturing output with market demand as well as inflationary cotton and other raw material costs.
-
Selling, general, and administrative expenses (SG&A) were
, or$19.3 million 17.5% of sales, compared to , or$19.7 million 15.0% of sales, in the prior year second quarter. The increase in SG&A as a percentage of sales was driven by the further expansion of Salt Life’s branded retail store footprint and the deleveraging effect of overall lower sales relative to the prior year period.
-
Operating income declined year-over-year from
, or$14.3 million 10.9% of sales, to an operating loss of , or ($5.4 million 4.9% ) of sales.
-
Net income declined from
, or$10.1 million per diluted share, to a loss of$1.44 , or ($7.0 million ) per diluted share.$1.00
-
Net inventory as of April 1, 2023, was
, a sequential decrease of$243.2 million from December 2022 and a year-over-year increase of$15.7 million from March 2022. The decrease from December 2022 stemmed primarily from efforts to manage inventory levels through production curtailments intended to match manufacturing output with demand.$45.5 million
-
Total net debt, including capital lease financing and cash on hand, was
as of April 1, 2023, an increase of$194.3 million from December 2022 and$9.1 million from March 2022. Cash on hand and availability under the Company’s$40.9 million U.S. revolving credit facility totaled as of April 1, 2023, a decrease of$12.8 million from December 2022 and$14.4 million from March 2022, with the decrease from December 2022 principally driven by investments in the business to support working capital needs.$22.4 million
-
The Company spent approximately
on capital expenditures during the second quarter compared to$2.0 million during the prior year second quarter, with the expenditures focused on Salt Life retail store build-outs as well as facility, information technology and manufacturing enhancements.$10.5 million
Conference Call
After the market close on May 4, 2023, financial results for the Company’s fiscal year 2023 second quarter ended April 1, 2023, will be released and, at 4:30 p.m. ET, the Company’s senior management will hold a conference call to discuss its financial results and business outlook. The Company invites you to join the call by dialing 888-886-7786. If calling from outside
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®, Soffe®, and Delta. The Company is a market leader in the direct-to-garment digital print and fulfillment industry, bringing proprietary DTG2Go technology and innovation to customer supply chains. 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
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
SELECTED FINANCIAL DATA: | ||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
March 2023 | March 2022 | March 2023 | March 2022 | |||||||||||||
Net Sales | $ |
110,335 |
|
$ |
131,698 |
|
$ |
217,630 |
|
$ |
242,444 |
|
||||
Cost of Goods Sold |
|
94,126 |
|
|
98,176 |
|
|
187,798 |
|
|
185,919 |
|
||||
Gross Profit |
|
16,209 |
|
|
33,522 |
|
|
29,832 |
|
|
56,525 |
|
||||
Selling, General and Administrative Expenses |
|
19,298 |
|
|
19,714 |
|
|
38,168 |
|
|
37,197 |
|
||||
Other Expense (Income), Net |
|
2,265 |
|
|
(533 |
) |
|
(356 |
) |
|
(929 |
) |
||||
Operating (Loss) Income |
|
(5,354 |
) |
|
14,341 |
|
|
(7,980 |
) |
|
20,257 |
|
||||
Interest Expense, Net |
|
3,723 |
|
|
1,801 |
|
|
6,613 |
|
|
3,399 |
|
||||
(Loss) Earnings Before (Benefit From) Provision For Income Taxes |
|
(9,077 |
) |
|
12,540 |
|
|
(14,593 |
) |
|
16,858 |
|
||||
(Benefit From) Provision For Income Taxes |
|
(2,079 |
) |
|
2,414 |
|
|
(3,996 |
) |
|
3,062 |
|
||||
Consolidated Net (Loss) Earnings |
|
(6,998 |
) |
|
10,126 |
|
|
(10,597 |
) |
|
13,796 |
|
||||
Net Loss (Income) Attributable to Non-Controlling Interest |
|
6 |
|
|
11 |
|
|
40 |
|
|
(14 |
) |
||||
Net (Loss) Earnings Attributable to Shareholders | $ |
(6,992 |
) |
$ |
10,137 |
|
$ |
(10,557 |
) |
$ |
13,782 |
|
||||
Weighted Average Shares Outstanding | ||||||||||||||||
Basic |
|
7,001 |
|
|
6,953 |
|
|
6,978 |
|
|
6,976 |
|
||||
Diluted |
|
7,001 |
|
|
7,040 |
|
|
6,978 |
|
|
7,063 |
|
||||
Net (Loss) Earnings per Common Share | ||||||||||||||||
Basic | $ |
(1.00 |
) |
$ |
1.46 |
|
$ |
(1.51 |
) |
$ |
1.98 |
|
||||
Diluted | $ |
(1.00 |
) |
$ |
1.44 |
|
$ |
(1.51 |
) |
$ |
1.95 |
|
||||
March 2023 | September 2022 | March 2022 | ||||||||||
Current Assets | ||||||||||||
Cash | $ |
625 |
|
$ |
300 |
|
$ |
428 |
|
|||
Receivables, Net |
|
64,825 |
|
|
71,586 |
|
|
78,258 |
|
|||
Inventories, Net |
|
243,167 |
|
|
248,538 |
|
|
197,691 |
|
|||
Prepaids and Other Assets |
|
4,096 |
|
|
2,755 |
|
|
3,698 |
|
|||
Total Current Assets |
|
312,713 |
|
|
323,179 |
|
|
280,075 |
|
|||
Noncurrent Assets | ||||||||||||
Property, Plant & Equipment, Net |
|
70,739 |
|
|
74,109 |
|
|
73,208 |
|
|||
Goodwill and Other Intangibles, Net |
|
60,731 |
|
|
61,923 |
|
|
63,101 |
|
|||
Deferred Income Taxes |
|
1,342 |
|
|
1,342 |
|
|
1,069 |
|
|||
Operating Lease Assets |
|
56,174 |
|
|
50,275 |
|
|
45,785 |
|
|||
Investment in Joint Venture |
|
9,036 |
|
|
9,886 |
|
|
10,027 |
|
|||
Other Noncurrent Assets |
|
2,239 |
|
|
2,967 |
|
|
2,079 |
|
|||
Total Noncurrent Assets |
|
200,261 |
|
|
200,502 |
|
|
195,269 |
|
|||
Total Assets | $ |
512,974 |
|
$ |
523,681 |
|
$ |
475,344 |
|
|||
Current Liabilities | ||||||||||||
Accounts Payable and Accrued Expenses | $ |
84,652 |
|
$ |
110,967 |
|
$ |
90,661 |
|
|||
Income Taxes Payable |
|
671 |
|
|
379 |
|
|
1,754 |
|
|||
Current Portion of Contingent Consideration |
|
- |
|
|
- |
|
|
1,397 |
|
|||
Current Portion of Finance Leases |
|
8,843 |
|
|
8,163 |
|
|
7,447 |
|
|||
Current Portion of Operating Leases |
|
8,861 |
|
|
8,876 |
|
|
8,377 |
|
|||
Current Portion of Long-Term Debt |
|
8,962 |
|
|
9,176 |
|
|
7,277 |
|
|||
Total Current Liabilities |
|
111,989 |
|
|
137,561 |
|
|
116,913 |
|
|||
Noncurrent Liabilities | ||||||||||||
Long-Term Taxes Payable |
|
2,131 |
|
|
2,841 |
|
|
2,841 |
|
|||
Deferred Income Taxes |
|
337 |
|
|
4,310 |
|
|
- |
|
|||
Long-Term Finance Leases |
|
17,483 |
|
|
16,776 |
|
|
16,592 |
|
|||
Long-Term Operating Leases |
|
48,804 |
|
|
42,721 |
|
|
39,427 |
|
|||
Long-Term Debt |
|
159,591 |
|
|
136,750 |
|
|
122,438 |
|
|||
Other Noncurrent Liabilities |
|
- |
|
|
- |
|
|
1,777 |
|
|||
Total Noncurrent Liabilities |
|
228,346 |
|
|
203,398 |
|
|
183,075 |
|
|||
Common Stock |
|
96 |
|
|
96 |
|
|
96 |
|
|||
Additional Paid-In Capital |
|
60,912 |
|
|
61,961 |
|
|
59,919 |
|
|||
Equity Attributable to Non-Controlling Interest |
|
(696 |
) |
|
(656 |
) |
|
(644 |
) |
|||
Retained Earnings |
|
156,043 |
|
|
166,600 |
|
|
160,642 |
|
|||
Accumulated Other Comprehensive Gain (Loss) |
|
180 |
|
|
141 |
|
|
(193 |
) |
|||
Treasury Stock |
|
(43,896 |
) |
|
(45,420 |
) |
|
(44,464 |
) |
|||
Total Equity |
|
172,639 |
|
|
182,722 |
|
|
175,356 |
|
|||
Total Liabilities and Equity | $ |
512,974 |
|
$ |
523,681 |
|
$ |
475,344 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230504005908/en/
Company Contact:
Justin Grow, 864-232-5200 x6604
investor.relations@deltaapparel.com
Investor Relations and Media Contact:
ICR, Inc.
Investors:
Tom Filandro, 646-277-1235
Media:
Jessica Liddell, 203-682-8208
DLAPR@icrinc.com
Source: Delta Apparel, Inc.
FAQ
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