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Sales rise marginally at Delta Apparel in Q3 FY'12
27
Apr '12
Delta Apparel Inc. reported that net sales for its fiscal third quarter ended March 31, 2012 increased slightly to $125.5 million, from $125.0 million in its fiscal 2011 third quarter. Net income for the fiscal 2012 third quarter was $1.9 million, or $0.22 per diluted share, compared to $5.7 million, or $0.65 per diluted share, in third quarter 2011.

Slower third quarter revenue growth resulted primarily from lower sales volumes in the Delta Catalog and Soffe businesses. Customers purchasing basic blank t-shirts appeared to be de-stocking in anticipation of lower future prices as cotton costs continued to decline.

This situation drove promotional pricing in the marketplace that negatively impacted revenue and gross margins. Sales of Soffe branded products were lower than expected due to soft retail demand early in the quarter. In addition, Soffe experienced lower military sales attributable to slower call-outs of military training gear, which have resumed to normal levels for the fourth fiscal quarter.

For the first nine months of fiscal 2012, net sales increased approximately 5% to $354.6 million from $337.6 million in the comparable period of 2011. The 2012 nine-month period, which includes the Company's previously-reported second quarter $16.2 million inventory markdown in its basics segment, yielded a net loss of $7.3 million, or $0.86 per diluted share, compared with 2011 nine-month net income of $8.8 million, or $1.00 per diluted share.

Branded Segment Review
Branded segment sales for the fiscal 2012 third quarter were $58.5 million, a 7.7% increase over fiscal 2011 third quarter sales of $54.3 million. Business at To The Game, led by Salt Life products, was strong for the quarter with a 42% increase in net sales at expected gross margins.

The Junkfood business continued its double-digit sales growth with a 15% increase over the prior year and Art Gun, while still relatively small, improved significantly both in revenue and margins. The exciting growth in these branded businesses was dampened somewhat by weakness in Soffe revenue and margins during the third quarter.

Basics Segment Review
The basics segment's net sales in the fiscal 2012 third quarter were $67.0 million, down approximately 5% from last year's third quarter. The decline came from the Delta Catalog business, which continues to suffer from excess inventories in the marketplace. The FunTees business continued to grow in the 2012 third quarter with a 13% increase in net sales. The increased revenue, coupled with lower costs, improved profits in the Company's private label business.

Robert W. Humphreys, Delta Apparel's Chairman and Chief Executive Officer, said that while he is disappointed in the results for the quarter, economic and apparel marketplace improvements that are just beginning to happen warrant cautious optimism. He further stated, “The inordinate cotton price increases of 2011 that created so much turmoil in the marketplace are now moderating. As the higher inventories in the marketplace are worked through, sales volumes should return to a more normal growth pattern, pricing should stabilize, and we would envision a better business environment going forward."

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