Delta Apparel third quarter sales boosted by Salt Life

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Delta Apparel, Inc. reported that its sales increased 7% in its fiscal 2022 third quarter ended July 2, 2022.

In a July 12 press release, Delta said sales for the quarter increased about 6%.

Robert W. Humphreys, Chairman and Chief Executive Officer, said, “We are pleased to have delivered another quarter of revenue growth in what remains a dynamic operating environment. We saw sales growth in the third quarter in our Delta Group and Salt Life Group segments. In our Delta Group segment, we achieved 3% year-over-year sales growth as we continued to benefit from our broad distribution channels. Demand increased for both our global brands and our digital print-on-demand business, somewhat offset by a decline in our Delta Direct business. At Salt Life, we saw strong sales growth of 30% year-over-year, further confirming the brand’s overall lifestyle appeal.

Humphreys continued, “Our continued growth in the face of economic headwinds validates our investment in Salt Life’s business footprint. This investment, combined with our growth in the wholesale channel and our updated e-commerce site, enables us to deliver a robust omnichannel shopping experience to our end consumers. With the opening of four new Salt Life stores during the quarter, we achieved our end of fiscal 2022 goal of opening 20 retail stores. As a result, we now operate Salt Life-branded stores in seven states. At DTG2Go, we continue to make progress with our on-demand digital first strategy and enjoyed another quarter of unit and revenue growth while expanding our digital equipment footprint to meet growing demand.

“Overall, we made good progress in the third quarter with a strong performance as our team remained focused on our long-term strategies while simultaneously managing the evolving economy and consumer expectations. Our investments in manufacturing have created economies of scale and platform flexibility, which positions us well to continue to grow our business. »

For the third quarter ended July 2, 2022
Net sales were $126.9 million in the third quarter of fiscal 2022, an increase of 7% over net sales of $118.7 million in the third quarter of the prior year. Net sales for the Delta Group segment increased 3% to $106.0 million in the third quarter of Fiscal 2022 from $102.6 million in the third quarter of the prior year. Salt Life segment net sales increased 30% to $20.9 million from $16.1 million in the third quarter a year earlier.

Within the Delta Group, segment sales increased in the Global Brands business with revenue and unit expansion with an expanded range of value-added service offerings. Sales in the Delta Direct channel declined following reduced market demand for activewear, primarily in the retail licensing sector. In the digital printing business, DTG2Go increased sales in the third quarter of fiscal 2021 and the second quarter of this year, benefiting from demand for the company’s digital technology and the growth in installed capacity.

The strong sales performance of the Salt Life business was driven by double-digit year-over-year growth in the wholesale and retail channels. Strong bookings from wholesale partners continued and the successful opening of four Salt Life stores in the quarter resulted in year-over-year sales growth. Primarily driven by on-hand inventory constraints, Salt Life’s sales in its e-commerce channel were down year-over-year; however, web demand accelerated sequentially as sales grew more than 40% from Q2 2022.

On a consolidated basis, third quarter gross margins were 24.2%, down 130 basis points from 25.5% a year earlier, primarily due to inflationary cost pressures, which are now reflected in the cost of sales.

During the quarter, higher cotton prices, energy and transportation costs were the main drivers of margin pressure.

General and administrative expenses were $22.4 million, or 17.7% of sales, compared to $19.9 million, or 16.8% of sales, in the third quarter a year earlier. The increase in general and administrative expenses is mainly attributable to the increase in variable selling expenses and travel expenses compared to the same period last year. In addition, distribution costs were higher mainly due to salary increases.

Operating profit in the third quarter of 2022 decreased to $9.3 million, or 7.3% of sales, from the prior year third quarter profit of $11.9 million, or 10, 0% of sales.

Net income was $6.2 million, or $0.88 per diluted share, compared to net income of $8.2 million, or $1.14 per share, last year.

Net inventory in June 2022 was $227.7 million, an increase of $30.0 million from March 2022 and $75.4 million from June 2021. The increase in inventory levels inventories reflects the expected increase in production combined with higher input costs.

Total net debt and cash was $162.4 million in June 2022, an increase of $9.0 million from March 2022, including lease financing. Cash and availability under the company’s revolving credit facility in the United States totaled $30.8 million in June 2022, a decrease of $4.4 million from March 2022.

The company invested approximately $5.5 million in capital expenditures in the third quarter of fiscal 2022, primarily in continued investment in digital printing equipment and the opening of Salt Life retail stores , compared to $3.2 million during the third quarter of the previous year.

In the third quarter of fiscal 2022, the company purchased 33,934 shares for $1.0 million under the previously announced share repurchase program, bringing the total amount repurchased to $56.4 million during the program duration. At the end of the third quarter of fiscal 2022, the company had $3.6 million of remaining repurchase capacity under the existing authorization.

Photo courtesy of Delta Apparel/Salt Life

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