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Delta FunTees segment sales rise

18 Aug '08
6 min read

The higher sales were driven primarily by a 63.9% increase in Junkfood sales, its fifth consecutive quarter of double-digit sales growth. Junkfood revenue was positively impacted by sales of the new co-branded products with GapKids and babyGap, increased foreign sales, and new boutique customers.

Fourth quarter revenue in the Soffe business increased 1.4% compared to the prior year fourth quarter, driven by increased sales in the military and college bookstore distribution channels offset by lower sales in the retail and sporting goods channels.

Operating income in the retail-ready segment was $9.4 million for the fourth fiscal quarter of 2008, an increase of $0.8 million from the prior year fourth quarter due primarily to the increased sales and leveraged fixed costs in the Junkfood business.

Activewear Apparel:
The activewear segment, comprised of the Delta and FunTees businesses, reported sales of $55.7 million for the three months ended June 28, 2008, a 14.9% increase from the prior year fourth quarter. Sales in the FunTees business increased 11.5% and sales in the Delta business increased 16.4%.

After completion of the manufacturing integration, FunTees quality and on-time deliveries returned to normal and customers placed additional programs with FunTees. This resulted in increased FunTees' fourth quarter shipments and is expected to drive additional business in fiscal year 2009.

Demand for the traditional Delta catalog products was strong during the fourth quarter as the additional production from Ceiba Textiles allowed the Company to improve its inventory position to service its customers better.

Although pricing increased during the quarter in the catalog business, these increases were offset by higher cotton, energy and transportation costs.

The activewear segment generated an operating loss of $1.8 million for the fourth fiscal quarter, an improvement of $5.7 million over the same quarter last year. The fourth quarter of fiscal year 2007 included $6.9 million in restructuring related expenses.

Fiscal 2009 Guidance:
For the 2009 fiscal year ending June 27, 2009, the Company expects net sales to be in the range of $340 to $360 million and earnings to be in the range of $0.70 to $0.90 per diluted share.

This compares to fiscal year 2008 sales of $322.0 million and a loss of ($0.06) per diluted share, inclusive of ($0.39) per diluted share of costs associated with the textile restructuring plan.

The Company remains concerned about the general slowdown of the U.S. economy and consumer demand for apparel. The difficult retail climate has led to higher than normal bankruptcy rates by apparel retailers.

This, coupled with weaker consumer demand and volatile raw material, energy and transportation prices, is an ongoing concern for the Company in fiscal year 2009.

In determining its expectations for the upcoming year the Company believes it has taken into consideration these heightened risk factors; however, further deterioration in the economy may negatively impact the Company's ability to achieve its expectations.

Mr. Humphreys concluded, “In our opinion, fiscal year 2009 will be an exciting year for our company. We ended fiscal year 2008 with our inventories properly balanced to serve our customers' needs and are well positioned to continue the organic growth we experienced over the past several months.

At the same time, we believe the many initiatives recently completed this past year have better positioned our Company for the long-term and should allow us to deliver top-line growth, improved profitability, and increased shareholder value in the future.”

Delta Apparel Inc

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