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Delta Apparel gross margin hit by higher raw material prices

25
Apr '08
Delta Apparel Inc reported financial results for its third fiscal quarter ended March 29, 2008.

Net sales for the three months ended March 29, 2008, were $75.4 million compared to $85.0 million in the prior year's third quarter. The decrease was due to lower sales in the activewear segment offset by increased sales in the retail-ready segment.

Gross margins declined 360 basis points to 20.8% compared to 24.4% in the prior year third quarter primarily as a result of textile restructuring related costs, higher raw material prices, increased energy and transportation costs and sales of a more basic mix in the catalog tee business.

The Company previously announced on July 18, 2007, an overall restructuring plan which included the closing of its Fayette, Alabama manufacturing facility, the expensing of excess manufacturing costs with the FunTees integration and the expensing of start-up costs stemming from the opening of its Honduran textile facility.

In the third quarter of fiscal 2008, the Company expensed $0.9 million, or $0.07 per diluted share, predominantly related to start-up costs from the opening of its Honduran textile facility. We expect that these third quarter restructuring costs will be the final charges relating to the Company's textile restructuring plan announced on July 18, 2007.

Net loss for the third quarter, inclusive of the textile restructuring charges, was $0.4 million, or ($0.05) per diluted share, compared to the prior year's net income of $2.8 million, or $0.32 per diluted share.


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