Delta Apparel achieved revenue growth in its basics business and all of its branded business units except for Soffe. However, cooler weather conditions throughout the country combined with continued weakness in certain retail channels resulted in slower than expected overall sales during the third quarter. This, along with continued softness in the Soffe business, resulted in lower comparable third quarter revenue and net income.
For the first nine months of fiscal 2013, net sales increased to $357.0 million from $354.6 million in the comparable period of 2012. Net income for the 2013 nine month period was $5.2 million, or $0.61 per diluted share. For comparison, the prior year’s nine-month period, which included the second quarter 2012 inventory markdown in the basics segment necessitated by the unprecedented record high cotton costs, resulted in a net loss of $7.3 million, or $0.86 per diluted share.
Branded Segment Review
All of Delta Apparel’s branded segment businesses experienced solid sales growth during the fiscal 2013 third quarter with the exception of Soffe; however, overall branded segment revenue was down 10% to $52.6 million, from $58.5 million in the prior year’s third quarter.
The decrease was driven entirely by a 30% sales decline in the Soffe business, due primarily to turmoil in the current retail environment and a strategic shift by some large retailers from branded products to more private label products.
Consistent with Delta Apparel’s other branded segment businesses, The Game saw good third quarter results, with 15% sales growth on higher volume and improved gross margins. Sales for Junkfood increased 9% with another strong showing in the professional sports license business.
Art Gun continued its rapid growth, achieving a 60% sales increase in the third quarter and a 95% increase for the nine-month period. With the exception of Soffe, each of the Company’s branded businesses also experienced sales growth with improved margins for the entire nine months.
Basics Segment Review
Net sales for Delta Apparel’s basics segment in the 2013 third quarter were up slightly to $67.4 million compared with $67.0 million for last year’s third quarter. Sales for the private label business grew 4% for the quarter and nearly 10% for the nine-month period.
The Catalog business achieved unit sales growth of 6% but this was offset by lower average selling prices, leaving sales relatively flat for the quarter. Revenue in the Catalog business is up over 8% for the year on unit sales growth of over 17%. Margins improved across the board in the basics segment due primarily to improved manufacturing performance.
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