Delta Apparel posts 19 percent increase in FY17 earnings

For the fiscal year ended September 30, 2017, Delta Apparel said net income increased to 10.5 million dollars or 1.33 dollars per diluted share, compared with 9 million dollars or 1.12 dollars per diluted share, in fiscal year 2016, representing a 19 percent increase. Net sales for the fiscal were 385.1 million dollars compared to 425.2 million dollars in the prior year due to the divestiture of the company’s Junkfood business.

Commenting on the fourth quarter and full year trading, Robert W. Humphreys, Delta Apparel’s Chairman and CEO said in a statement: “The year began with Hurricane Matthew and ended with Hurricanes Harvey and Irma, all three of which disrupted some of our key markets. In the months between, the retail sector and consumer demand remained weak, resulting in less apparel retail doors in the market. While our net sales reflected the impacts of those events and the Junkfood divestiture, our margins held strong and we ended the year with a 19 percent increase in earnings. Although the retail environment is likely to remain challenging, we believe we are off to a good start as we move into our new fiscal year.”

Fourth quarter net income and net sale decline

For the fourth quarter ended September 30, 2017, net income was 2.1 million dollars or 0.27 dollar per diluted share, compared to 2.3 million dollars or 0.29 dollar per diluted share, in the prior year quarter. Net sales during the quarter were 91.3 million dollars compared with 114.4 million dollars in the prior year fourth quarter.

The divestiture of Junkfood, which generated net sales of nearly 17 million dollars in the prior year fourth quarter, the company said, principally drove the decline. Severe weather disruptions, along with the general impact of retail door closings in the market, also contributed to the lower sales in the quarter.

Delta Apparel added that despite solid quarter-over-quarter margin growth in the Salt Life and activewear businesses, overall gross margins were down to 18.2 percent from 20.9 percent in the prior year period.

For the whole year, adjusting for the Junkfood divestiture, the company added, net sales were down 1.4 percent due to continued retail weakness, customer bankruptcies and severe weather-related market disruptions. Also despite gross margin improvement in both the basics and branded segments, overall gross margins declined 100 basis points from a higher mix of basics sales during the year.

Segment-wise review of Delta Apparel results

Basics segment net sales increased 1.1 percent to 280.3 million dollars due to strong growth in private label sales and gains in the ad-specialty and regional screen print channels, which were partially offset by continued softness in the retail licensing channel. Fourth quarter net sales in the basics segment were 69.6 million dollars compared to 73.7 million dollars in the prior year quarter.

For the full year, revenue growth and higher gross margins led to operating income in the basics segment of 24.2 million dollars, an 8.4 percent improvement from the prior year.

Activewear sales were up 1.3 percent driven by record revenue in the FunTees private label business and continued strong growth in higher-margin fashion basics products. Art Gun, the company added, began the fiscal year with a strong and well-executed holiday season and also finished nicely, with several previously delayed customer launches materializing in the fourth quarter. Despite these delayed launches as well as the operational disruptions caused by multiple hurricanes, Art Gun sales were down only 1 percent from the prior year.

Branded segment net sales for the full year were 104.8 million dollars, compared to 148.1 million dollars in the prior year. Excluding Junkfood, net sales in the branded segment declined 8.5 million dollars, a decrease of 8.7 percent year-over-year. Fourth quarter net sales in the branded segment were 21.7 million dollars, compared with 40.7 million dollars in the fiscal 2016 fourth quarter, with the Junkfood divestiture causing 17 million dollars of the decline.

Gross margins improved year-over-year in the branded segment and operating income was 3.9 million dollars in fiscal year 2017, down from 7 million dollars in the prior year due to the divestiture of Junkfood.

The company said, product line enhancements and new retail doors carried Salt Life to another period of growth and expansion. Salt Life net sales increased by 6.3 percent for the year, including growth of 6.9 percent for the fourth quarter, despite the impacts of hurricanes in key markets. Salt Life’s ecommerce business grew nearly 40 percent year-over-year. Sales in the Soffe business were down 7.9 million dollars due to a loss of comparable sales in fiscal year 2017 associated with the bankruptcies of The Sports Authority and other customers. Soffe’s B2C ecommerce business reported 21 percent sales growth over the prior year.

Picture:Facebook/Salt Life