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Q1FY’14 sales down 5.6% at Delta Apparel

January 24, 2014 (United States Of America)

Delta Apparel, Inc. reported that for its fiscal 2014 first quarter ended December 28, 2013, net sales were $100.0 million versus $106.8 million for the comparable 2013 period. Continued strong sales growth in the Salt Life and Art Gun businesses was offset by an anticipated sales decline at Soffe as well as lower sales in the Junkfood and The Game businesses.

Demand for basic undecorated tees was weak to start the quarter but improved as the quarter progressed. Lower sales, coupled with higher costs associated with operational initiatives that were completed during the quarter, produced a net loss for the 2014 first quarter of $1.6 million, or $0.20 per diluted share, compared with net income for the prior year’s quarter of $46 thousand or $0.01 per share.

Basics Segment Review

Sales for Delta’s basics segment were $58.6 million in the 2014 first quarter, a slight decrease from $58.8 million in the prior year period. Healthy demand for private label products was offset by a sales decline in undecorated catalog tees. Sales of catalog tees were, however, bolstered by the Company’s new offerings of decorated, full package programs using catalog blanks, which have gained traction and nearly doubled from a year ago.

Branded Segment Review

Delta’s branded segment net sales for the fiscal 2014 first quarter were $41.4 million compared with $47.9 million in the prior year period. The decline resulted from lower sales of Soffe, Junk Food and The Game branded products. Soffe sales declined 16% from the prior year quarter but were slightly better than expected.

Soffe products will be back on the shelves at certain mid-tier retailers for spring 2014, which should drive sales growth at Soffe in the second half of the fiscal year. Junkfood sales were down 27% from the prior year December quarter as retailers placed larger orders for professional sports products that shipped in the September quarter this year but in the prior year shipped in the December quarter.

In addition, general weakness at department stores unfavorably impacted re-orders and "chase" business during the holiday season. Junkfood has initiated new programs with specialty and other retailers that should drive growth in the coming quarters relative to prior year periods.

The Company’s college bookstore apparel line, which was consolidated within The Game business during the September quarter, experienced sales declines during the December quarter due to product replenishment challenges stemming from the previously announced closing of the Wendell decoration facility. The sales decline in college apparel was partially offset by double-digit sales growth in The Game's branded headwear and private-label corporate headwear programs.

Salt Life continued its strong revenue growth, with a 30% sales increase over the prior year quarter. Salt Life products are now on the shelves in over 2,200 retail doors across the United States, with a current concentration on the East Coast. Art Gun also continued its consistent growth, with revenue increasing more than 50% during the December quarter compared to the prior year period.


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