Delta Apparel Reports Third Quarter Fiscal 2023 Results
- None.
- None.
Significantly Improved Operating Environment Sets Stage for Return to Growth
Chairman and Chief Executive Officer Robert W. Humphreys commented, “We saw encouraging indications throughout the quarter that the two major trends impacting both our business and the entire industry this year - elevated cotton pricing and demand destruction from high inventory levels in the retail supply chain - are receding and we are moving into a more normalized operating environment. I’m extremely proud of the way our team has navigated these broad-based events and executed on strategies to counteract them, including significant reductions in inventory and debt as well as several needle-moving cost restructuring initiatives.
We continue to see some signs of demand improvement in parts of our Activewear business, including our channel serving mass and mid-tier retailers, and our Salt Life business continues to expand its consumer reach with two new branded retail locations in
Mr. Humphreys concluded, “Our decision toward the end of last year to reduce production levels and purchase less price-inflated cotton proved to be strategically sound, but the significant one-time cost impacts of that decision greatly impacted our operating results this quarter and year-to-date. Looking ahead, we expect steady improvement in our operating results as we close out our fourth quarter and move into our next fiscal year. For fiscal year 2024, we anticipate net sales in a range of
For the third quarter ended July 1, 2023:
-
Net sales were
compared to prior year third quarter net sales of$106.3 million . Salt Life Group segment net sales were$126.9 million compared to prior year third quarter net sales of$17.2 million , with the year-over-year comparison skewed by significant sales occurring in the prior year third quarter due to transportation delays. Net sales in the Delta Group segment were$20.9 million compared to$89.1 million in the prior year third quarter.$106 million
-
Gross margins were
13.1% compared to24.2% in the prior year period, driven primarily by the above-referenced production curtailments intended to match manufacturing output with lighter market demand as well as inflationary cotton costs (collectively “Production Curtailment & Cotton Costs”). Excluding the Production Curtailment & Cotton Costs, adjusted third quarter gross margins were22.7% . Delta Group segment gross margins for the quarter were5.9% compared to19.1% in the prior year period; however, excluding the Production Curtailment & Cotton Costs, adjusted gross margins in the Delta Group segment were17.4% . Salt Life Group segment gross margins for the quarter increased 30 basis points to50.5% from50.2% in the prior year period.
-
Selling, general, and administrative expenses (SG&A) declined favorably to
from$18.5 million in the prior year third quarter, while SG&A as a percentage of sales was down favorably to the prior year period at$22.4 million 17.4% .
-
Operating income declined year-over-year from
, or$9.3 million 7.3% of sales, to an operating loss of , or ($4.5 million 4.2% ) of sales. However, excluding the Production Curtailment & Cotton Costs, adjusted operating income was , or$5.8 million 5.5% of sales. Delta Group segment operating income for the quarter declined from to a loss of$10.7 million ; however, excluding the Production Curtailment and Cotton Costs, adjusted operating income in the Delta Group segment was$3.6 million , or$6.7 million 7.5% of sales. Salt Life Group segment operating income for the quarter was , or$1.6 million 9.6% of sales, compared to and$3.6 million 17.2% of sales in the prior year period.
-
Net income declined from
, or$6.2 million $.88 per diluted share, to a loss of , or ($6.3 million ) per diluted share. However, excluding the Production Curtailment & Cotton Costs, third quarter adjusted net income was$0.90 , or$1.2 million per diluted share.$0.17
-
Net inventory as of July 1, 2023, was
, a sequential decrease of almost$226.2 million from December 2022 and generally flat year-over-year with inventory of$33 million at June 2022.$227.6 million
-
Total net debt, including capital lease financing and cash on hand, was
as of July 1, 2023, an approximately$166.2 million 15% reduction from at March 2023 and a slight increase from$194.3 million at June 2022. Cash on hand and availability under the Company’s$162.4 million U.S. revolving credit facility totaled as of July 1, 2023, a decrease of$14.4 million from December 2022 and$12.8 million from June 2022, with the decrease from December 2022 principally driven by investments in the business to support working capital needs as well as higher interest costs.$16.4 million
-
The Company spent approximately
on capital expenditures during the third quarter compared to$1.5 million during the prior year third quarter, with the expenditures focused on Salt Life retail store buildouts as well as facility and information technology enhancements.$5.5 million
For the nine months ended July 1, 2023:
-
Net sales were
compared to prior year period net sales of$323.9 million . Salt Life Group segment net sales were$369.3 million compared to prior year period net sales of$46.5 million . Net sales in the Delta Group segment were$46 million compared to$277.5 million in the prior year period.$323 million
-
Gross margins were
13.5% compared to23.6% in the prior year period, driven primarily by the Production Curtailment & Cotton Costs coupled with costs incurred in connection with restructuring initiatives (collectively “Restructuring Costs”). Excluding the Production Curtailment & Cotton Costs and Restructuring Costs, adjusted gross margins were22.7% . Delta Group segment gross margins were6.5% compared to19.6% in the prior year period; however, excluding the Production Curtailment & Cotton Costs and Restructuring Costs, adjusted gross margins in the Delta Group segment were17.2% . Salt Life Group segment gross margins increased to55.4% from51.6% in the prior year period.
-
Selling, general, and administrative expenses (SG&A) declined favorably to
from$56.7 million in the prior year period, while SG&A as a percentage of sales increased from$59.6 million 16.1% to17.5% .
-
Operating income declined year-over-year from
, or$29.5 million 8% of sales, to an operating loss of , or ($12.4 million 3.8% ) of sales. However, excluding the Production Curtailment & Cotton Costs and Restructuring Costs, adjusted operating income was , or$20.5 million 6.3% of sales. Delta Group segment operating income declined from to a loss of$33.6 million ; however, excluding the Production Curtailment & Cotton Costs and Restructuring Costs, adjusted operating income in the Delta Group segment was$11.0 million , or$22.0 million 7.9% of sales. Salt Life Group segment operating income was , or$6.6 million 14.1% of sales, compared to , or$7 million 15.3% of sales, in the prior year period.
-
Net income declined from
, or$20 million per diluted share, to a loss of$2.84 , or ($16.8 million ) per diluted share. However, excluding the Production Curtailment & Cotton Costs and Restructuring Costs, adjusted net income was$2.41 , or$7.2 million per diluted share, for the nine-month period.$1.02
Conference Call
After the market close on August 3, 2023, financial results for the Company’s fiscal year 2023 third quarter and nine-month period ended July 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
Non-GAAP Financial Measures
Reconciliations of GAAP gross margins to non-GAAP adjusted gross margins, GAAP operating income to non-GAAP adjusted operating income, and GAAP net income to non-GAAP adjusted net income are presented in tables accompanying the selected financial data included in this release and provide useful information to evaluate the Company’s operational performance. A description of the amounts excluded on a non-GAAP basis are provided in conjunction with these tables. Non-GAAP adjusted gross margin, non-GAAP adjusted operating income, and non-GAAP adjusted net income should be evaluated in light of the Company’s financial statements prepared in accordance with GAAP.
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 |
|
Nine Months Ended |
|||||||||||||
June 2023 |
|
June 2022 |
|
June 2023 |
|
June 2022 |
|||||||||
Net Sales | $ |
106,319 |
|
$ |
126,875 |
|
$ |
323,949 |
|
$ |
369,319 |
|
|||
Cost of Goods Sold |
|
92,384 |
|
|
96,182 |
|
|
280,181 |
|
|
282,100 |
|
|||
Gross Profit |
|
13,935 |
|
|
30,693 |
|
|
43,768 |
|
|
87,219 |
|
|||
Selling, General and Administrative Expenses |
|
18,491 |
|
|
22,416 |
|
|
56,658 |
|
|
59,613 |
|
|||
Other (Income), Net |
|
(95 |
) |
|
(1,018 |
) |
|
(452 |
) |
|
(1,947 |
) |
|||
Operating (Loss) Income |
|
(4,461 |
) |
|
9,295 |
|
|
(12,438 |
) |
|
29,553 |
|
|||
Interest Expense, Net |
|
4,049 |
|
|
1,971 |
|
|
10,662 |
|
|
5,370 |
|
|||
(Loss) Earnings Before (Benefit From) Provision For Income Taxes |
|
(8,510 |
) |
|
7,324 |
|
|
(23,100 |
) |
|
24,183 |
|
|||
(Benefit From) Provision For Income Taxes |
|
(2,218 |
) |
|
1,087 |
|
|
(6,214 |
) |
|
4,149 |
|
|||
Consolidated Net (Loss) Earnings |
|
(6,292 |
) |
|
6,237 |
|
|
(16,886 |
) |
|
20,034 |
|
|||
Net Loss (Income) Attributable to Non-Controlling Interest |
|
5 |
|
|
3 |
|
|
45 |
|
|
(11 |
) |
|||
Net (Loss) Earnings Attributable to Shareholders | $ |
(6,287 |
) |
$ |
6,240 |
|
$ |
(16,841 |
) |
$ |
20,023 |
|
|||
Weighted Average Shares Outstanding | |||||||||||||||
Basic |
|
7,001 |
|
|
6,946 |
|
|
6,985 |
|
|
6,966 |
|
|||
Diluted |
|
7,001 |
|
|
7,065 |
|
|
6,985 |
|
|
7,061 |
|
|||
Net (Loss) Earnings per Common Share | |||||||||||||||
Basic | $ |
(0.90 |
) |
$ |
0.90 |
|
$ |
(2.41 |
) |
$ |
2.87 |
|
|||
Diluted |
$ |
(0.90 |
) |
$ |
0.88 |
|
$ |
(2.41 |
) |
$ |
2.84 |
|
|||
June 2023 |
|
September 2022 |
|
June 2022 |
|||||||||||
Current Assets | |||||||||||||||
Cash | $ |
296 |
|
$ |
300 |
|
$ |
542 |
|
||||||
Receivables, Net |
|
44,520 |
|
|
71,586 |
|
|
69,868 |
|
||||||
Inventories, Net |
|
226,196 |
|
|
248,538 |
|
|
227,671 |
|
||||||
Prepaids and Other Assets |
|
4,221 |
|
|
2,755 |
|
|
3,798 |
|
||||||
Total Current Assets |
|
275,233 |
|
|
323,179 |
|
|
301,879 |
|
||||||
Noncurrent Assets | |||||||||||||||
Property, Plant & Equipment, Net |
|
69,040 |
|
|
74,109 |
|
|
75,144 |
|
||||||
Goodwill and Other Intangibles, Net |
|
60,161 |
|
|
61,923 |
|
|
62,524 |
|
||||||
Deferred Income Taxes |
|
3,105 |
|
|
1,342 |
|
|
1,164 |
|
||||||
Operating Lease Assets |
|
54,054 |
|
|
50,275 |
|
|
47,570 |
|
||||||
Investment in Joint Venture |
|
9,356 |
|
|
9,886 |
|
|
10,277 |
|
||||||
Other Noncurrent Assets |
|
2,020 |
|
|
2,967 |
|
|
2,893 |
|
||||||
Total Noncurrent Assets |
|
197,736 |
|
|
200,502 |
|
|
199,572 |
|
||||||
Total Assets | $ |
472,969 |
|
$ |
523,681 |
|
$ |
501,451 |
|
||||||
Current Liabilities | |||||||||||||||
Accounts Payable and Accrued Expenses | $ |
81,321 |
|
$ |
110,967 |
|
$ |
102,180 |
|
||||||
Income Taxes Payable |
|
695 |
|
|
379 |
|
|
666 |
|
||||||
Current Portion of Contingent Consideration |
|
- |
|
|
- |
|
|
563 |
|
||||||
Current Portion of Finance Leases |
|
8,942 |
|
|
8,163 |
|
|
8,265 |
|
||||||
Current Portion of Operating Leases |
|
8,980 |
|
|
8,876 |
|
|
8,044 |
|
||||||
Current Portion of Long-Term Debt |
|
10,180 |
|
|
9,176 |
|
|
7,615 |
|
||||||
Total Current Liabilities |
|
110,118 |
|
|
137,561 |
|
|
127,333 |
|
||||||
Noncurrent Liabilities | |||||||||||||||
Long-Term Taxes Payable |
|
2,131 |
|
|
2,841 |
|
|
2,841 |
|
||||||
Long-Term Finance Leases |
|
15,871 |
|
|
16,776 |
|
|
18,802 |
|
||||||
Long-Term Operating Leases |
|
46,664 |
|
|
42,721 |
|
|
40,940 |
|
||||||
Long-Term Debt |
|
131,461 |
|
|
136,750 |
|
|
128,230 |
|
||||||
Other Noncurrent Liabilities |
|
- |
|
|
4,310 |
|
|
1,591 |
|
||||||
Total Noncurrent Liabilities |
|
196,127 |
|
|
203,398 |
|
|
192,404 |
|
||||||
Common Stock |
|
96 |
|
|
96 |
|
|
96 |
|
||||||
Additional Paid-In Capital |
|
61,448 |
|
|
61,961 |
|
|
60,822 |
|
||||||
Equity Attributable to Non-Controlling Interest |
|
(701 |
) |
|
(656 |
) |
|
(647 |
) |
||||||
Retained Earnings |
|
149,756 |
|
|
166,600 |
|
|
166,882 |
|
||||||
Accumulated Other Comprehensive Loss |
|
21 |
|
|
141 |
|
|
(7 |
) |
||||||
Treasury Stock |
|
(43,896 |
) |
|
(45,420 |
) |
|
(45,432 |
) |
||||||
Total Equity |
|
166,724 |
|
|
182,722 |
|
|
181,714 |
|
||||||
Total Liabilities and Equity | $ |
472,969 |
|
$ |
523,681 |
|
$ |
501,451 |
|
RECONCILIATION OF GROSS MARGIN, OPERATING INCOME, AND NET INCOME TO NON-GAAP MEASURES ADJUSTED GROSS MARGIN, ADJUSTED OPERATING INCOME, AND ADJUSTED NET INCOME | |||||||||||||||
Unaudited | |||||||||||||||
(in thousands) | |||||||||||||||
Reconciliation of Gross Margin to Adjusted Gross Margin – Unaudited | |||||||||||||||
Three Months Ending |
|
Nine Months Ending |
|||||||||||||
June 2023 |
|
June 2022 |
|
June 2023 |
|
June 2022 |
|||||||||
Gross Margin | $ |
13,935 |
|
$ |
30,693 |
|
$ |
43,768 |
|
$ |
87,219 |
|
|||
Production Curtailment Costs (1) |
|
3,340 |
|
|
- |
|
|
7,589 |
|
|
- |
|
|||
Cotton Costs (2) |
|
6,906 |
|
|
- |
|
|
22,027 |
|
|
- |
|
|||
Adjusted Gross Margin | $ |
24,181 |
|
$ |
30,693 |
|
$ |
73,384 |
|
$ |
87,219 |
|
|||
|
22.7 |
% |
|
24.2 |
% |
|
22.7 |
% |
|
23.6 |
% |
||||
Reconciliation of Operating Income to Adjusted Operating Income – Unaudited | |||||||||||||||
Three Months Ending |
Nine Months Ending |
||||||||||||||
June 2023 |
June 2022 |
June 2023 |
June 2022 |
||||||||||||
Operating (Loss) Income | $ |
(4,461 |
) |
$ |
9,295 |
|
$ |
(12,438 |
) |
$ |
29,553 |
|
|||
Production Curtailment Costs (1) |
|
3,340 |
|
|
- |
|
|
7,589 |
|
|
- |
|
|||
Cotton Costs (2) |
|
6,906 |
|
|
- |
|
|
22,027 |
|
|
- |
|
|||
Restructuring Costs (3) |
|
32 |
|
|
- |
|
|
3,344 |
|
|
- |
|
|||
Adjusted Operating Income | $ |
5,817 |
|
$ |
9,295 |
|
$ |
20,522 |
|
$ |
29,553 |
|
|||
Reconciliation of Net Income to Adjusted Net Income – Unaudited | |||||||||||||||
Three Months Ending |
Nine Months Ending |
||||||||||||||
June 2023 |
June 2022 |
June 2023 |
June 2022 |
||||||||||||
Net (Loss) Income | $ |
(6,287 |
) |
$ |
6,240 |
|
$ |
(16,841 |
) |
$ |
20,023 |
|
|||
Production Curtailment Costs (1) |
|
3,340 |
|
|
- |
|
|
7,589 |
|
|
- |
|
|||
Cotton Costs (2) |
|
6,906 |
|
|
- |
|
|
22,027 |
|
|
- |
|
|||
Restructuring Costs (3) |
|
32 |
|
|
- |
|
|
3,344 |
|
|
- |
|
|||
Tax Impact |
|
(2,775 |
) |
|
- |
|
|
(8,950 |
) |
|
- |
|
|||
Adjusted Net Income | $ |
1,216 |
|
$ |
6,240 |
|
$ |
7,169 |
|
$ |
20,023 |
|
|||
Reconciliation of Delta Group Segment Gross Margin to Delta Group Segment Adjusted Gross Margin - Unaudited | |||||||||||||||
Three Months Ending |
Nine Months Ending |
||||||||||||||
June 2023 |
June 2022 |
June 2023 |
June 2022 |
||||||||||||
Gross Margin | $ |
5,254 |
|
$ |
20,227 |
|
$ |
18,013 |
|
$ |
63,470 |
|
|||
Production Curtailment Costs (1) |
|
3,340 |
|
|
- |
|
|
7,589 |
|
|
- |
|
|||
Cotton Costs (2) |
|
6,906 |
|
|
- |
|
|
22,027 |
|
|
- |
|
|||
Adjusted Gross Margin | $ |
15,500 |
|
$ |
20,227 |
|
$ |
47,629 |
|
$ |
63,470 |
|
|||
|
17.4 |
% |
|
19.1 |
% |
|
17.2 |
% |
|
19.6 |
% |
||||
Reconciliation of Delta Group Segment Operating Income to Delta Group Segment Adjusted Operating Income - Unaudited | |||||||||||||||
Three Months Ending |
Nine Months Ending |
||||||||||||||
June 2023 |
June 2022 |
June 2023 |
June 2022 |
||||||||||||
Operating (Loss) Income | $ |
(3,621 |
) |
$ |
10,701 |
|
$ |
(10,979 |
) |
$ |
33,557 |
|
|||
Production Curtailment Costs (1) |
|
3,340 |
|
|
- |
|
|
7,589 |
|
|
- |
|
|||
Cotton Costs (2) |
|
6,906 |
|
|
- |
|
|
22,027 |
|
|
- |
|
|||
Restructuring Costs (3) |
|
32 |
|
|
- |
|
|
3,344 |
|
|
- |
|
|||
Adjusted Operating Income | $ |
6,657 |
|
$ |
10,701 |
|
$ |
21,981 |
|
$ |
33,557 |
|
|||
|
7.5 |
% |
|
10.1 |
% |
|
7.9 |
% |
|
10.4 |
% |
||||
(1) Production Curtailment Costs consist of unabsorbed fixed costs, temporary unemployment benefit payments, and other expense items resulting from the Company’s decision to reduce production levels to better align with the significantly reduced demand across the activewear industry due to high inventory levels stemming from the heavy replenishment activity following pandemic-related supply chain challenges. | |||||||||||||||
(2) Cotton Costs consist of the amount of the cotton component of the Company's cost of sales in excess of the average price per pound of cotton over a recent 10-year period ( |
|||||||||||||||
(3) Restructuring Costs consist of employee severance benefits paid in connection with the transition of our more expensive |
|||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230803615752/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.
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