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Delta Apparel Q2 net income up 33 percent

By Prachi Singh

9 May 2017

Business

Delta Apparel’s second quarter net income increased 33 percent to 4.5 million dollars or 0.58 dollar per diluted share, compared with 3.4 million dollars or 0.43 dollar per diluted share, for last year’s second quarter. Approximately 0.11 dollar per share earnings, the company said, resulted from a gain on the sale of the company’s Junkfood business completed on March 31, 2017.

Commenting on the results, Robert W. Humphreys, Delta Apparel’s Chairman and CEO said, “Our fiscal 2017 second quarter was productive and we completed a number of key initiatives to further improve our business results. Earnings were up nearly 10 percent even after adjusting for the 0.11 dollar per share gain from the sale of Junkfood. As we indicated last quarter, we remain focused on strategies that will drive revenue growth and improved operating margins throughout our company.”

Q2 net sales were down at Delta Apparel

Net sales for the quarter were 104.1 million dollars compared with 109.2 million dollars in the prior year period. The company attributed this decline in sales to considerably lower sales at Junkfood during the quarter and the lingering impact of The Sports Authority bankruptcy on Soffe revenue.

While margins expanded in most of the Company’s business units during the quarter, overall gross margins were 30 basis points lower year-over-year due to softness in the Junkfood business. On a sequential basis, however, gross margins expanded by 270 basis points. Operating profit for the quarter was 7.5 million dollars or 7.2 percent of sales versus 5.9 million dollars or 5.4 percent of sales, in the prior year second quarter.

For the first six months of the 2017 fiscal year, net sales were 189.5 million dollars compared with 199.3 million dollars in the prior year period. Net income for the period was 3.9 million dollars or 0.50 dollar per diluted share versus 4.1 million dollars or 0.52 dollar per diluted share, in the comparable period last year.

Review of the segment-wise performance

For the second quarter, basics segment revenue grew to 70.8 million dollars from 69.8 million dollars in the prior year quarter. Art Gun revenues increased 11 percent over the comparable 2016 quarter, as well as a 480 basis point gross margin expansion. Delta Activewear sales grew 1 percent driven by strong sales growth with private label programs. Fashion basics also contributed to the activewear growth with a 40 percent sales increase with significantly higher margins than basic tees.

Delta Activewear gross margins improved 60 basis points, while operating profit in the basics segment for the quarter was 7.6 million dollars or 10.7 percent of sales, compared with 6.7 million dollars or 9.6 percent of sales, in the prior year second quarter.

Revenue in the branded segment was 33.3 million dollars compared with 39.3 million dollars in the 2016 second quarter due to a 40 percent decline in Junkfood sales and the unfavorable impact of The Sports Authority bankruptcy on Soffe’s sales during the quarter. The loss of The Sports Authority business notwithstanding, Soffe enjoyed a 150 basis point margin expansion during the quarter as it continued to strengthen its business with the military, e-retailers, and strategic and independent sporting goods retailers. Soffe also continued to grow its direct-to-consumer business, with its branded ecommerce revenue up 38 percent for the quarter, bringing its year-to-date growth to 34percent.

Salt Life achieved expanded gross margins on a 10 percent revenue increase driven by its expanded product line and broadened distribution. The company said, operating profits in Salt Life were further enhanced by lower distribution expenses and leveraged administrative costs. Operating profit in the branded segment, including the 1.3 million dollars gain on the sale of Junkfood, was 2.8 million dollars or 8.3 percent of sales, compared with 2.6 million dollars or 6.5 percent of sales, in the prior year second quarter.

Picture:Facebook/Salt Life

Delta Apparel