• Home
  • News
  • Business
  • Delta Apparel: Gross margin expansion drives profit

Delta Apparel: Gross margin expansion drives profit

By Prachi Singh

loading...

Scroll down to read more

Business |REPORT

Delta Apparel has announced that its second quarter expanded gross margins drove net income to 3.4 million dollars or 0.43 dollar per diluted share. Net sales, the company said impacted to some degree by the bankruptcy of a large retail customer, were 109.2 million dollars compared with sales of 109.6 million dollars in the prior year second quarter. For the first six months of fiscal 2016, net sales increased to 199.3 million dollars from 197.6 million dollars in the prior year period

“The strength that Delta Apparel has shown in the first half of this fiscal year is a testament to the effectiveness of the strategic initiatives we announced 18 months ago and the ability of our team to successfully implement them,” said Robert W. Humphreys, Delta Apparel’s Chairman and CEO, adding, “Looking ahead to the second half of our fiscal year, even with continued sluggishness in the retail marketplace we expect continued gross margin expansion and modest top line growth driven by anticipated market share gains and trends we are seeing toward a more profitable sales mix.”

Detailed review of Q2 and H1

Overall gross margins expanded 510 basis points over the prior year period and 270 basis points sequentially. Operating profit was 5.9 million dollars or 5.4 percent of sales, resulting in earnings of 0.43 dollar per diluted share compared with 0.03 dollar per diluted share in the prior year second quarter after adjusting to exclude the gain on the sale of *The Game* business realised during that quarter.

Net income for the first half was 4.1 million dollars or 0.52 dollar per diluted share compared with a net loss in the prior year period of 565 thousand dollars or 0.07 dollar per diluted share.

Basics segment gross margins in the second quarter expanded by 810 basis points and net sales were 69.8 million dollars, down 2.2 percent from prior year second quarter. Activewear sales were down 1.5 percent from the prior year period due to a 7 percent decline in unit sales of basic tees that was partially offset by strong growth in fashion basics, which exceeded 250 percent year-over-year growth, and catalog full-package growth of 15 percent. Private label sales improved 4 percent.

Art Gun experienced solid year-over-year growth in March but an overall sales decline of approximately 500 thousand dollars for the full second quarter.

Branded segment review

Adjusted for The Game and Kentucky Derby sales in the prior year second quarter, branded segment net sales grew 2.8 percent to 39.3 million dollars achieving margin expansion of 110 basis points. Salt Life experienced year-over-year sales growth of 23 percent and nearly 120 percent sequentially, with its ecommerce website, Saltlife.com , growing 48 percent over the prior year second quarter and 68 percent year-to-date.

The company said that Soffe business was negatively impacted by a large customer bankruptcy and otherwise would have achieved sales growth of 5 percent over the prior year period. While the Junkfoodclothing.com ecommerce website achieved growth of 26 percent for the second quarter, overall Junkfood sales were down 1.9 million dollars from the prior year period.

picture:saltlife.com

Delta Apparel