Exhibit 99.1

 

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Delta Apparel Reports Second Quarter Fiscal 2023 Results

Record Sales Pace and Double-Digit Growth at Salt Life and DTG2Go Continue

 

May 4, 2023, DULUTH, GA. --(BUSINESS WIRE)-- Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear, lifestyle apparel, and on-demand digital print strategies, today announced financial results for its fiscal year 2023 second quarter ended April 1, 2023.

 

Chairman and Chief Executive Officer Robert W. Humphreys commented, “Our second quarter performance highlights the durability and inherent advantages in our multi-market strategy during uneven demand cycles. We achieved double-digit sales growth across three of our five go-to-market channels and saw strength in areas where we provide decorated ‘consumer ready’ products directly to end-users or close to the point-of-sale.

 

Our Salt Life business continues to capitalize on the growing popularity of its lifestyle brand domestically and internationally, achieving both record sales and profitability during the quarter. The growth at Salt Life included double-digit increases across its branded retail and eCommerce channels as well as healthy growth at wholesale.  Salt Life also expanded the scope of its license portfolio through a new partnership in the multi-billion-dollar home furnishings market that we expect to generate significant future royalty revenue. 

 

Our DTG2Go business also continued its high growth trend during the quarter with nearly 20% topline expansion over the prior year.  We continue to see a multi-decade growth runway in digital print as players in the traditional decorated apparel markets increasingly recognize its speed-to-customer and other advantages. The benefits of on-demand strategies in reducing inventory investment are even more apparent in the current high interest rate environment.

 

The apparel markets remain dynamic. As expected, our Delta Direct and Global Brands channels were impacted by the well-publicized high inventory levels and associated slower demand in the supply chains they serve, while our Retail Direct channel saw double-digit sales growth in the quarter.

 

Mr. Humphreys concluded, “We remain keenly focused on managing our working capital, reducing inventory and debt levels, and leveraging the many opportunities across our business to provide higher-margin and quicker-turn ‘consumer ready’ products. Executing on these initiatives and working through the remainder of last year’s high-price cotton inventory sets the stage for improved operating results as we move through the second half of our fiscal year and positions us to capitalize on accelerations in demand.” 

 

For the second quarter ended April 1, 2023:

 

 

Net sales were $110.3 million compared to prior year second quarter net sales of $131.7 million. Salt Life Group segment net sales grew over 16% to $19.0 million from prior year second quarter net sales of $16.4 million.  Net sales in the Delta Group segment were $91.3 million compared to $115.3 million in the prior year second quarter.

 

 

Gross margins were 14.7% compared to 25.5% in the prior year, driven by production curtailments intended to match manufacturing output with market demand as well as inflationary cotton and other raw material costs.

 

 

Selling, general, and administrative expenses (SG&A) were $19.3 million, or 17.5% of sales, compared to $19.7 million, or 15.0% of sales, in the prior year second quarter. The increase in SG&A as a percentage of sales was driven by the further expansion of Salt Life’s branded retail store footprint and the deleveraging effect of overall lower sales relative to the prior year period.

 

 

Operating income declined year-over-year from $14.3 million, or 10.9% of sales, to an operating loss of $5.4 million, or (4.9%) of sales.

 

 

Net income declined from $10.1 million, or $1.44 per diluted share, to a loss of $7.0 million, or ($1.00) per diluted share.

 

 

Net inventory as of April 1, 2023, was $243.2 million, a sequential decrease of $15.7 million from December 2022 and a year-over-year increase of $45.5 million from March 2022. The decrease from December 2022 stemmed primarily from efforts to manage inventory levels through production curtailments intended to match manufacturing output with demand.

 

 

Total net debt, including capital lease financing and cash on hand, was $194.3 million as of April 1, 2023, an increase of $9.1 million from December 2022 and $40.9 million from March 2022. Cash on hand and availability under the Company’s U.S. revolving credit facility totaled $12.8 million as of April 1, 2023, a decrease of $14.4 million from December 2022 and $22.4 million from March 2022, with the decrease from December 2022 principally driven by investments in the business to support working capital needs.

 

 

The Company spent approximately $2.0 million on capital expenditures during the second quarter compared to $10.5 million during the prior year second quarter, with the expenditures focused on Salt Life retail store build-outs as well as facility, information technology and manufacturing enhancements.

 

Conference Call

 

After the market close on May 4, 2023, financial results for the Company’s fiscal year 2023 second quarter ended April 1, 2023, will be released and, at 4:30 p.m. ET, the Company’s senior management will hold a conference call to discuss its financial results and business outlook. The Company invites you to join the call by dialing 888-886-7786. If calling from outside the United States, please dial 416-764-8658. A live webcast of the conference call will be available at www.deltaapparelinc.com. Please visit the website at least 15 minutes early to register for the teleconference webcast and download any necessary software. A replay of the call will be available through June 4, 2023. To access the telephone replay, participants should dial toll-free 844-512-2921. International callers can dial 412-317-6671. The access code for the replay is 06112508.

 

About Delta Apparel, Inc.

 

Delta Apparel, Inc., along with its operating subsidiaries DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, Soffe®, and Delta. The Company is a market leader in the direct-to-garment digital print and fulfillment industry, bringing proprietary DTG2Go technology and innovation to customer supply chains. The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business e-commerce sites. The Company’s products are also made available direct-to-consumer on its websites at www.saltlife.com, www.soffe.com and www.deltaapparel.com as well as through its branded retail stores. The Company’s operations are located throughout the United States, Honduras, El Salvador, and Mexico, and it employs approximately 7,000 people worldwide. Additional information about the Company is available at www.deltaapparelinc.com.

 

Cautionary Note Regarding Forward-Looking Statements

 

This press release may contain “forward-looking” statements that involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, the general U.S. and international economic conditions; the impact of the COVID-19 pandemic and government/social actions taken to contain its spread on our operations, financial condition, liquidity, and capital investments, including recent labor shortages, inventory constraints, and supply chain disruptions; significant interruptions or disruptions within our manufacturing, distribution or other operations; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; the volatility and uncertainty of cotton and other raw material prices and availability; the competitive conditions in the apparel industry; our ability to predict or react to changing consumer preferences or trends; our ability to successfully open and operate new retail stores in a timely and cost-effective manner; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; changes in economic, political or social stability at our offshore locations or in areas in which we, or our suppliers or vendors, operate; our ability to attract and retain key management; the volatility and uncertainty of energy, fuel and related costs; material disruptions in our information systems related to our business operations; compromises of our data security; significant changes in our effective tax rate; significant litigation in either domestic or international jurisdictions; recalls, claims and negative publicity associated with product liability issues; the ability to protect our trademarks and other intellectual property; changes in international trade regulations; our ability to comply with trade regulations; changes in employment laws or regulations or our relationship with employees; negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors; the inability of suppliers or other third-parties, including those related to transportation, to fulfill the terms of their contracts with us; restrictions on our ability to borrow capital or service our indebtedness; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the impairment of acquired intangible assets; foreign currency exchange rate fluctuations; the illiquidity of our shares; price volatility in our shares and the general volatility of the stock market; and the other factors set forth in the "Risk Factors" contained in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and as updated in our subsequently filed Quarterly Reports on Form 10-Q. Except as may be required by law, Delta Apparel, Inc. expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

 

Company Contact:
Justin Grow, 864-232-5200 x6604
investor.relations@deltaapparel.com

Investor Relations and Media Contact:
ICR, Inc.

Investors:
Tom Filandro, 646-277-1235

Media:
Jessica Liddell, 203-682-8208
DLAPR@icrinc.com

 

 

 

SELECTED FINANCIAL DATA:

                               

(In thousands, except per share amounts)

                               
   

Three Months Ended

   

Six Months Ended

 
   

March 2023

   

March 2022

   

March 2023

   

March 2022

 
                                 

Net Sales

  $ 110,335     $ 131,698     $ 217,630     $ 242,444  

Cost of Goods Sold

    94,126       98,176       187,798       185,919  

Gross Profit

    16,209       33,522       29,832       56,525  
                                 

Selling, General and Administrative Expenses

    19,298       19,714       38,168       37,197  

Other Expense (Income), Net

    2,265       (533 )     (356 )     (929 )

Operating (Loss) Income

    (5,354 )     14,341       (7,980 )     20,257  
                                 

Interest Expense, Net

    3,723       1,801       6,613       3,399  
                                 

(Loss) Earnings Before (Benefit From) Provision For Income Taxes

    (9,077 )     12,540       (14,593 )     16,858  
                                 

(Benefit From) Provision For Income Taxes

    (2,079 )     2,414       (3,996 )     3,062  
                                 

Consolidated Net (Loss) Earnings

    (6,998 )     10,126       (10,597 )     13,796  
                                 

Net Loss (Income) Attributable to Non-Controlling Interest

    6       11       40       (14 )
                                 

Net (Loss) Earnings Attributable to Shareholders

  $ (6,992 )   $ 10,137     $ (10,557 )   $ 13,782  
                                 

Weighted Average Shares Outstanding

                               

Basic

    7,001       6,953       6,978       6,976  

Diluted

    7,001       7,040       6,978       7,063  
                                 

Net (Loss) Earnings per Common Share

                               

Basic

  $ (1.00 )   $ 1.46     $ (1.51 )   $ 1.98  

Diluted

  $ (1.00 )   $ 1.44     $ (1.51 )   $ 1.95  

 

 

 

   

March 2023

   

September 2022

   

March 2022

 
                         

Current Assets

                       

Cash

  $ 625     $ 300     $ 428  

Receivables, Net

    64,825       71,586       78,258  

Inventories, Net

    243,167       248,538       197,691  

Prepaids and Other Assets

    4,096       2,755       3,698  

Total Current Assets

    312,713       323,179       280,075  
                         

Noncurrent Assets

                       

Property, Plant & Equipment, Net

    70,739       74,109       73,208  

Goodwill and Other Intangibles, Net

    60,731       61,923       63,101  

Deferred Income Taxes

    1,342       1,342       1,069  

Operating Lease Assets

    56,174       50,275       45,785  

Investment in Joint Venture

    9,036       9,886       10,027  

Other Noncurrent Assets

    2,239       2,967       2,079  

Total Noncurrent Assets

    200,261       200,502       195,269  
                         

Total Assets

  $ 512,974     $ 523,681     $ 475,344  
                         
                         

Current Liabilities

                       

Accounts Payable and Accrued Expenses

  $ 84,652     $ 110,967     $ 90,661  

Income Taxes Payable

    671       379       1,754  

Current Portion of Contingent Consideration

    -       -       1,397  

Current Portion of Finance Leases

    8,843       8,163       7,447  

Current Portion of Operating Leases

    8,861       8,876       8,377  

Current Portion of Long-Term Debt

    8,962       9,176       7,277  

Total Current Liabilities

    111,989       137,561       116,913  
                         

Noncurrent Liabilities

                       

Long-Term Taxes Payable

    2,131       2,841       2,841  

Deferred Income Taxes

    337       4,310       -  

Long-Term Finance Leases

    17,483       16,776       16,592  

Long-Term Operating Leases

    48,804       42,721       39,427  

Long-Term Debt

    159,591       136,750       122,438  

Other Noncurrent Liabilities

    -       -       1,777  

Total Noncurrent Liabilities

    228,346       203,398       183,075  
                         

Common Stock

    96       96       96  

Additional Paid-In Capital

    60,912       61,961       59,919  

Equity Attributable to Non-Controlling Interest

    (696 )     (656 )     (644 )

Retained Earnings

    156,043       166,600       160,642  

Accumulated Other Comprehensive Gain (Loss)

    180       141       (193 )

Treasury Stock

    (43,896 )     (45,420 )     (44,464 )

Total Equity

    172,639       182,722       175,356  
                         

Total Liabilities and Equity

  $ 512,974     $ 523,681     $ 475,344