Delta Apparel, Inc. (NYSE MKT: DLA) today reported net sales of
$93.4 million for its fiscal 2015 first quarter ended December 27,
2014, versus $100.0 million for the comparable 2014 period.
Continued solid growth in Salt Life and on all of the Company’s
eCommerce sites was offset by lower sales in other business units.
While the lower sales were mitigated somewhat by improved margins
in all but one of the Company’s business units and by overall lower
general and administrative costs, the Company experienced a net
loss for the 2015 first quarter of $4.2 million, or $0.53 per
diluted share, compared with a net loss for the prior year quarter
of $1.6 million, or $0.20 per share.
Selling, general and administrative expenses for the fiscal 2015
first quarter were $18.5 million, a 6.6% decrease from $19.8
million in the prior year quarter. The improvement resulted from
the strategic cost restructuring completed in the prior quarter and
continued tight spending controls, being offset to some degree by
higher marketing expense for the Soffe and Salt Life brands.
Despite the lower sales in the 2015 first quarter, selling, general
and administrative expenses were 19.9% of revenue, consistent with
the prior year first quarter, providing further evidence of the
lower fixed cost structure the Company has implemented.
Basics Segment Review
Net sales for the Company’s basics segment were $57.7 million in
the 2015 first quarter, a decrease of approximately 8% percent from
$62.5 million in the prior year period. The decline stemmed from
lower prices on reduced unit sales in the undecorated tee business,
which was impacted by continued price discounting resulting from
weak demand in the marketplace. New programs were won in the
private label business that should drive strong sales growth as the
year unfolds. Art Gun, with the successful installation of
state-of-the-art digital printing equipment in the September
quarter, achieved 4% unit growth but revenue was hindered as
customers transitioned to different price-point garments.
Branded Segment Review
Fiscal 2015 first quarter net sales in the branded segment were
$35.7 million compared with $37.5 million in the prior year period,
a 5% decline. Salt Life continued its excellent performance with
15% growth in what is typically its weakest quarter. Salt Life
currently has a substantial Spring order backlog indicating
stronger revenue growth rates in upcoming quarters. Our other
branded product lines experienced lower sales, as the retail market
continued to struggle with unsettled economic conditions and
changing consumer shopping trends. Soffe’s net sales in the first
quarter declined 10% from the prior year period. While Soffe still
faces challenges from the soft retail market, the Company believes
that its fresh line of Spring merchandise along with upcoming
marketing initiatives should result in sales growth for the year.
The sluggish retail economy was also primarily responsible for a 5%
decline in Junkfood sales for the quarter, but we believe that the
success of several new programs with specialty retailers and the
excitement generated among customers by our new Junkfood store in
Venice, California bodes well for future sales.
Robert W. Humphreys, Delta Apparel, Inc.’s Chairman and Chief
Executive Officer, commented that this first quarter decline in net
sales should not be the yardstick by which the rest of the year is
measured. “We believe that most areas of our business are pointing
to growth in subsequent quarters, particularly in the second half
of the fiscal year. Each of our eCommerce sites reported
significant growth and had their best quarter ever. While this
doesn’t make up for weak sales in traditional retail outlets, it
tells us unequivocally that our brands are important and sought
after by consumers.”
“Salt Life net sales grew 15% in the December quarter, which is
traditionally its weakest quarter. The backlog of orders for Spring
is encouraging and our recent consumer survey has confirmed a
strong lifestyle brand affiliation among Salt Life customers. The
Salt Life retail store and licensed Salt Life restaurants continue
their success in making the Salt Life brand a larger part of
people’s daily lives. We are looking forward to the launch of a new
Salt Life internet channel and other digital media campaigns that
will bring together consumers who all love to live the Salt
Life.”
“We are using a similar marketing technique with Junkfood and
the opening of our first Junkfood store in Venice, California where
retailers are seeing the most effective ways of merchandising
Junkfood products. The management team at Soffe has launched a new
marketing campaign to support a refined brand position and build
consumer demand. While it may be premature to provide the details,
the program will involve highly targeted consumer media to drive
engagement and loyalty with Soffe’s core consumers. Soffe has also
completed its conversion to a new enterprise system, which lowers
its technology and staffing costs and affords Soffe greater
efficiency and improved customer service.”
“The recent investments in our manufacturing platform provide us
with the capacity to meet current and future requirements as demand
increases. As the year progresses, we should see benefits from
efficiency improvements and lower input costs, with these lower
costs improving our gross margins beginning in the second half of
the fiscal year.”
“Delta Apparel took decisive action in recent quarters to
improve profitability and the plan is working. Our administrative
headcount has been reduced and our manufacturing platform has been
improved. Equally important, most of the associated costs to
complete these initiatives are behind us. We have made significant
progress on the rationalization analysis of our products and sales
channels and, as the year unfolds, we will be taking steps to
redeploy assets to those areas that are more strategic to our
long-term goals. This, along with our current backlog of orders,
gives us a high degree of optimism that we will see solid overall
sales growth and greater profitability as the year progresses.”
Conference Call
The Company will hold a conference call with senior management
to discuss the financial results at 4:30 p.m. ET today. The Company
invites you to join the call by dialing 888-503-8169. If calling
from outside the United States, dial 719-325-2144. 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 March 5, 2015. To access the telephone replay,
participants should dial toll-free 877-870-5176. International
callers can dial 858-384-5517. The access code for the replay is
3560699.
About Delta Apparel, Inc.
Delta Apparel, Inc., along with its operating subsidiaries, M.
J. Soffe, LLC, Junkfood Clothing Company, To The Game, LLC and Art
Gun, LLC, is an international design, marketing, manufacturing, and
sourcing company that features a diverse portfolio of lifestyle
basic and branded activewear apparel and headwear. The Company
specializes in selling casual and athletic products across
distribution tiers, including specialty stores, boutiques,
department stores, mid-tier and mass chains, college bookstores and
the U.S. military. The Company’s products are made available
direct-to-consumer on its websites at www.soffe.com,
www.junkfoodclothing.com, www.saltlife.com and
www.deltaapparel.com. The Company's operations are located
throughout the United States, Honduras, El Salvador, and Mexico,
and it employs approximately 6,900 people worldwide. Additional
information about the Company is available at
www.deltaapparelinc.com.
Cautionary Note Regarding Forward Looking
Statements
Statements and other information in this press release that are
not reported financial results or other historical information are
forward-looking statements subject to the safe harbor created by
the Private Securities Litigation Reform Act of 1995. These are
based on our expectations and are necessarily dependent upon
assumptions, estimates and data that we believe are reasonable and
accurate but may be incorrect, incomplete or imprecise.
Forward-looking statements are also subject to a number of business
risks and uncertainties, any of which could cause actual results or
actions to differ materially from those set forth in or implied by
the forward-looking statements. The risks and uncertainties
include, among others, the volatility and uncertainty of cotton and
other raw material prices; the general U.S. and international
economic conditions; the competitive conditions in the apparel
industry; restrictions on our ability to borrow capital or service
our indebtedness; inability to successfully implement strategic
initiatives; deterioration in the financial condition of our
customers and suppliers and changes in the operations and
strategies of our customers and suppliers; our ability to predict
or react to changing consumer preferences or trends; pricing
pressures and the implementation of cost reduction strategies;
changes in the economic, political and social stability at our
offshore locations; our ability to attract and retain key
management; the effect of unseasonable weather conditions on
purchases of our products; 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 recent acquisitions; the volatility and
uncertainty of energy and fuel prices; material disruptions in our
information systems related to our business operations; data
security or privacy breaches; significant interruptions within our
manufacturing or distribution operations; changes in or our ability
to comply with safety, health and environmental regulations;
significant litigation in either domestic or international
jurisdictions: the ability to protect our trademarks and other
intellectual property; the ability to obtain and renew our
significant license agreements; the impairment of acquired
intangible assets; changes in e-commerce laws and regulations;
changes in international trade regulations; changes in employment
laws or regulations or our relationship with employees; cost
increases and reduction in future profitability due to recent
healthcare legislation; foreign currency exchange rate
fluctuations; violations of manufacturing standards or labor laws
or unethical business practices by our suppliers and independent
contractors; the illiquidity of our shares; price volatility in our
shares and the general volatility of the stock market; and the
costs required to comply with the regulatory landscape regarding
public company governance and disclosure; and other risks described
from time to time in our reports filed with the Securities and
Exchange Commission. Accordingly, any forward-looking statements do
not purport to be predictions of future events or circumstances and
may not be realized. Further, any forward-looking statements are
made only as of the date of this press release and we do not
undertake publicly to update or revise the forward-looking
statements even if it becomes clear that any such statements or any
projected results will not be realized or that any contemplated
strategic initiatives will not be implemented.
SELECTED FINANCIAL DATA: (In thousands,
except per share amounts)
Three Months Ended Dec
27, 2014 Dec 28, 2013 Net Sales $ 93,381 $
100,012
Cost of Goods Sold 78,055
80,970
Gross Profit 15,326 19,042
Selling,
General and Administrative 18,540 19,843
Other Expense
(Income), Net 3 (127 )
Operating
Loss (3,217 ) (674 )
Interest Expense, Net
1,528 1,458
Loss Before Benefit from
Income Taxes (4,745 ) (2,132 )
Benefit from Income
Taxes (534 ) (535 )
Net Loss $
(4,211 ) $ (1,597 )
Weighted Average Shares
Outstanding Basic 7,881 7,884
Diluted 7,881 7,884
Net Loss per Common Share Basic $ (0.53 ) $
(0.20 )
Diluted $ (0.53 ) $ (0.20 )
Dec 27, 2014 Sep 27, 2014 Dec 28, 2013
Current Assets Cash $ 238 $ 612 $ 288
Receivables, Net 52,225 68,802 49,792
Income Tax
Receivable 2,153 1,360 3,042
Inventories, Net 175,615
162,188 174,198
Prepaids and Other Assets 5,710 4,534 4,600
Deferred Income Taxes 12,504 12,152
5,670
Total Current Assets 248,445 249,648
237,590
Noncurrent Assets Property, Plant &
Equipment, Net 40,401 41,005 42,795
Goodwill and Other
Intangibles, Net 59,896 60,229 61,226
Other Noncurrent
Assets 3,587 3,696 3,784
Total Noncurrent Assets 103,884 104,930 107,805
Total Assets $ 352,329 $ 354,578
$ 345,395
Current Liabilities Accounts
Payable and Accrued Expenses $ 78,601 $ 77,886 $ 64,991
Current Portion of Long-Term Debt 6,954
15,504 14,504
Total Current Liabilities 85,555
93,390 79,495
Noncurrent Liabilities Long-Term
Debt 123,471 114,469 118,340
Deferred Income Taxes 4,408
3,399 4,628
Other Noncurrent Liabilities 4,982
5,113 4,992
Total Noncurrent
Liabilities 132,861 122,981 127,960
Shareholders'
Equity 133,913 138,207 137,940
Total
Liabilities and Shareholders' Equity $ 352,329 $ 354,578
$ 345,395
Delta Apparel, Inc.Company Contact:Deborah MerrillChief
Financial Officer864-232-5200 x6620orInvestor Relations
Contact:Sally Wallick,
CFA404-806-1398investor.relations@deltaapparel.com
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