Delta Apparel net sales decline 5 percent in Q2

REPORT_ Delta Apparel reported that for its fiscal 2014 second quarter ended 

March 29, 2014, net sales were 114.5 million dollars versus 120.1 million dollars for the comparable 2013 period. The 5 percent sales decline was due primarily to unseasonably cold weather throughout the country and the weak retail environment prevailing for most of the quarter. Operating margins in the branded segment improved 160 basis points from the prior March quarter.

For the first six months of fiscal 2014, net sales were 214.5 million dollars compared with 226.8 million dollars in the prior year period. The company experienced a net loss for the 2014 first six months of 2.4 million dollars, or 0.30 dollars per diluted share, compared with net income of 1.7 million dollars, or 0.19 dollars per diluted share, in the prior year period.

Net sales for the basics segment were 64.1 million dollars in the 2014 second quarter, a 5 percent decrease. Private label sales were down 17 percent as some customers reduced shipments of products because of slowness at retail and changes in product strategy. Sales of catalog basic tees increased 2 percent based on a 7 percent increase in unit sales offset by a 5 percent decrease in average selling prices.

Branded segment sales for the fiscal 2014 second quarter were 50.3 million dollars compared with 52.6 million dollars in the prior year period. Salt Life and Art Gun continued their strong growth trends of the past several quarters but those were offset by lower sales at Soffe, Junk Food and The Game. Although Soffe sales were down 12 percent compared to a year ago, the new Soffe juniors' offerings and Intensity branded products are regaining traction and showing solid sell-through at retail.

Sales of Junk Food products declined 3 percent. The Game apparel and headwear lines are also winning new programs as college bookstores begin placing orders for the new school year. Art Gun, with a 34 percent sales increase, continued to grow with online retailers. Salt Life, which the Greenville, S.C.-based company acquired in August 2013, had another strong quarter, expanding sales 28 percent from the prior year period.

Opined Robert W. Humphreys, Delta Apparel’s Chairman and Chief Executive Officer, “The disappointing second quarter resulted mainly from the convergence of several previously-noted marketplace risks as well as extended cooler weather throughout the United States. We continue our focus on providing high-quality products and customer satisfaction that should result in the long-term growth and profitability of Delta Apparel, especially as economic conditions improve and consumer buying power is renewed. In the meantime, we are keeping our costs in line and introducing new products that consumers want with the efficiency and price points our customers need.”

Net sales in the second half of fiscal 2014 may not be sufficient to overcome the declines of the first half, which could, in turn, reduce incremental revenues that the company expected to leverage against fixed costs. This, combined with recent and potential future increases in cotton prices and higher than expected legal-related costs, leads management, at this time, to revise the company’s fiscal year 2014 guidance to sales in the range of 480 million dollars to 490 million dollars, and earnings in the range of 0.80 dollars to 0.90 dollars per diluted share.