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Delta Apparel raises fiscal year sales outlook
03
May '11
Delta Apparel Inc reported record results for its third quarter of fiscal year 2011.

Third Quarter Highlights

• Revenue growth of 15.8% to a record $125.0 million
• Organic revenue growth of 12.3% from branded and basics segments
• Gross margin expansion of 130 basis points to 24.7%
• Operating profit increase of 65.3% to $8.1 million
• Earnings up 91.2% to a record $0.65 per diluted share

Robert W. Humphreys, Chairman and Chief Executive Officer, commented, “Delta Apparel, Inc.'s marketing and merchandising initiatives in both business segments, coupled with favorable manufacturing performance and our continued ability to leverage our fixed costs, were the key components in delivering this significant earnings expansion on double-digit revenue growth. We feel having a vertically integrated manufacturing platform in the western hemisphere is a strategic advantage, allowing us to meet the needs of retailers on price, quality and speed of delivery.”

Fiscal Year 2011 Outlook

Based on Delta Apparel, Inc.'s strong third quarter results and solid outlook for the fourth quarter, the Company has raised its full year sales and earnings guidance for fiscal year 2011. The Company now expects earnings to be in the range of $1.85 to $1.95 per diluted share from its previous guidance of $1.55 to $1.70 per diluted share. This would be an increase of between 32% and 39% over earnings of $1.40 per diluted share in fiscal 2010.

Full year 2011 sales are now expected to be $465 to $475 million, up $10 million from its previous guidance range and sales growth of 10% to 12% from fiscal year 2010 sales of $424.4 million. The 2010 fiscal year was a 53-week year while fiscal year 2011 is a 52-week year. The Company further developed its tax planning during the quarter and now expects its effective tax rate to be 26% for fiscal year 2011 compared to its previous expectation of 30%.

Third Quarter Review

Net sales for the three months ended April 2, 2011 were a record $125.0 million, an increase of $17.0 million, or 15.8%, as both of the Company's business segments achieved double-digit sales growth compared to the prior year third quarter. The Company's third quarter operating income was $8.1 million, an increase of $3.2 million, or 65.3%, compared to the third quarter of fiscal year 2010.

The effective tax rate decreased to 23.7% in the current quarter compared to 25.4% in the same quarter of the prior year. Net income for the quarter ended April 2, 2011 was $5.7 million, or $0.65 per diluted share, compared to $3.0 million, or $0.34 per diluted share, in the prior year third quarter.

Branded Segment Review

Branded segment sales were $54.3 million, a 17.5% increase from the prior year third quarter sales of $46.2 million. The sales increase is comprised of organic growth of 9.3% and the additional revenue from The Cotton Exchange, the college bookstore division of Soffe. Higher sales of Soffe apparel and The Game headwear, coupled with the new Salt Life collection, drove the organic sales growth during the quarter.

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