Delta Apparel sales slip, net income and gross margin rise

By

Obi Anyanwu

Published
Aug 9, 2016

Delta Apparel, Inc. net sales took a slight dip in its third quarter and nine months of 2016. The company cited the weak retail environment and the absence of the Kentucky Derby license, which it did not renew for 2016, as the reason for the sales’ negative impact.

 
Third quarter net sales dropped to $111.6 million, or $0.32 per diluted share, from $120.5 million or $0.55 per diluted share in the prior year, and net sales for the nine months decreased to $310.9 million from $328.9 million in the previous year. Net income for the nine months increased to $6.7 million, or $0.84 per diluted share, from $3.9 million, or $0.48 per diluted share.
 
The basics segment decreased 8.8% in net sales to $72.1 million from $79.0 million in the third quarter due to a 10% decrease in activewear sales, but this was offset by more than 100% growth in fashion basics and nearly 50% growth in catalog full-package products.

The branded segment net sales were $39.5 million, which was level with the prior year, and produced operating profit of $2.7 million or 6.7% of sales for the quarter.
 
Despite the decrease in sales, Delta continued its year-over-year margin expansion. The company reported a gross margin expansion of 210 basis points, which drove third quarter operating profit for the basics segment to $5.4 million, or 7.5% of sales.
 
Robert W. Humphreys, Delta Apparel, Inc.’s Chairman and Chief Executive Officer, commented, “Delta Apparel has completed yet another quarter of solid profitability despite persistent softness in the retail apparel marketplace. Our continued focus on [efficiency, cost savings and bottom-line growth] has resulted in a rigorous manufacturing realignment that is expected to significantly reset our manufacturing cost structure and carry an annual savings of approximately $8 million, or $0.70 per diluted share, beginning in the first half fiscal 2017 and becoming fully annualized by our 2017 fiscal year-end.