DLA Delta Apparel Inc

Record Sales Pace and Double-Digit Growth at Salt Life and DTG2Go Continue

Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear, lifestyle apparel, and on-demand digital print strategies, today announced financial results for its fiscal year 2023 second quarter ended April 1, 2023.

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 20% topline expansion over the prior year. We continue to see a multi-decade growth runway in digital print as players in the traditional decorated apparel markets increasingly recognize its speed-to-customer and other advantages. The benefits of on-demand strategies in reducing inventory investment are even more apparent in the current high interest rate environment.

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 $110.3 million compared to prior year second quarter net sales of $131.7 million. Salt Life Group segment net sales grew over 16% to $19.0 million from prior year second quarter net sales of $16.4 million. Net sales in the Delta Group segment were $91.3 million compared to $115.3 million in the prior year second quarter.

• Gross margins were 14.7% compared to 25.5% 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 $19.3 million, or 17.5% of sales, compared to $19.7 million, or 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 $14.3 million, or 10.9% of sales, to an operating loss of $5.4 million, or (4.9%) of sales.

• Net income declined from $10.1 million, or $1.44 per diluted share, to a loss of $7.0 million, or ($1.00) per diluted share.

• Net inventory as of April 1, 2023, was $243.2 million, a sequential decrease of $15.7 million from December 2022 and a year-over-year increase of $45.5 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.

• Total net debt, including capital lease financing and cash on hand, was $194.3 million as of April 1, 2023, an increase of $9.1 million from December 2022 and $40.9 million from March 2022. Cash on hand and availability under the Company’s U.S. revolving credit facility totaled $12.8 million as of April 1, 2023, a decrease of $14.4 million from December 2022 and $22.4 million from March 2022, with the decrease from December 2022 principally driven by investments in the business to support working capital needs.

• The Company spent approximately $2.0 million on capital expenditures during the second quarter compared to $10.5 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.

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 the United States, please dial 416-764-8658. 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 4, 2023. 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 06112508.

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 U.S. military, and through its business-to-business e-commerce sites. The Company’s products are also made available direct-to-consumer on its websites at www.saltlife.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 7,000 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 impact of the COVID-19 pandemic and government/social actions taken to contain its spread on our operations, financial condition, liquidity, and capital investments, including recent labor shortages, inventory constraints, and supply chain disruptions; significant interruptions or disruptions within our manufacturing, distribution 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; the competitive conditions in the apparel industry; our ability to predict or react to changing consumer preferences or trends; our ability to successfully open and operate new retail stores in a timely and cost-effective manner; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; changes in economic, political or social stability at our offshore locations or in areas in which we, or our suppliers or vendors, operate; our ability to attract and retain key management; the volatility and uncertainty of energy, fuel and related costs; material disruptions in our information systems related to our business operations; compromises of our data security; significant changes in our effective tax rate; 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; changes in international trade regulations; our ability to comply with trade regulations; changes in employment laws or regulations or our relationship with employees; negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors; the inability of suppliers or other third-parties, including those related to transportation, to fulfill the terms of their contracts with us; restrictions on our ability to borrow capital or service our indebtedness; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the impairment of acquired intangible assets; foreign currency exchange rate fluctuations; the illiquidity of our shares; price volatility in our shares and the general volatility of the stock market; 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 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