Delta Apparel Q1 net profit up
Delta Apparel Inc reported financial results for the fiscal 2012 first quarter ended October 1, 2011.
First Quarter Highlights:
• Net sales increased 14.5% to a record $123.5 million.
• Gross margins improved 130 basis points to 25.3%.
• Operating profit improved to 5.4% of sales from 2.7% of sales in the prior year period.
• Net income increased 167.7% to $4.4 million from $1.6 million in the prior year period.
• Diluted EPS increased 163.2% to $0.50 from $0.19 in the prior year period.
Sales for the three months ended October 1, 2011 increased $15.6 million to a record $123.5 million. Each business unit contributed to the 14.5% organic sales growth in the quarter. Gross margins improved to 25.3% compared to 24.0% in the prior year first quarter, with margin expansion in both the branded and basics segments. Selling, general and administrative expenses were 19.9% of sales, an improvement of 130 basis points compared to 21.2% of sales in the prior year first quarter.
The prior year included costs associated with the acquisition of The Cotton Exchange, expenses related to the start-up of Art Gun, and brand-marketing campaigns that were not repeated during the current year quarter. Interest expense increased $0.3 million during the quarter compared to the prior year driven primarily from the higher working capital resulting from the significant rise in cotton costs.
The Company's effective tax rate is 24% for the current year quarter, down from the prior year quarter of 30%, but consistent with the 23.6% effective tax rate for the 2011 fiscal year. Net income for the quarter ended October 1, 2011 was $4.4 million, or $0.50 per diluted share, compared to $1.6 million, or $0.19 per diluted share, in the prior year first quarter.
Robert W. Humphreys, Chairman and Chief Executive Officer, commented, “We just completed a strong first quarter to begin fiscal year 2012. Each operating division increased revenues, contributing to the 14.5% organic sales growth during the quarter. Demand for our brands, licensed properties and decorated merchandise continues to grow, which allows us to ship higher value product to our retail partners and directly to consumers through our e-commerce sites.
Our manufacturing facilities are operating efficiently and we are leveraging our fixed costs on higher volumes to improve our profitability. We anticipate continued revenue growth in the upcoming quarters, although we expect our profitability to be negatively impacted with our highest cost cotton flowing through cost of sales in our second and third fiscal quarters. Despite these less than ideal conditions, we expect to generate earnings growth in fiscal year 2012.”
Branded Segment Review
Branded segment sales for the first quarter were $70.9 million, a 21.5% increase from the prior year first quarter sales of $58.4 million. Sales of vintage inspired tees through our Junkfood business and Salt Life products drove the growth during the quarter, with Soffe and Art Gun also contributing to the revenue increase. Gross margin improvement, along with better leveraged selling, general and administrative costs, drove an increase in operating income to $5.1 million, or 7.2% of sales, compared to $2.8 million, or 4.8% of sales, in the prior year quarter.