Delta Apparel posts dip in Q4 and full year net sales
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In its results announcement for the year and fourth quarter, Delta Apparel said net sales for the 13-weeks fourth quarter were 114.4 million dollars compared to 120.2 million dollars in the prior year’s 14-weeks fourth quarter. Removing the additional week in the prior year, the company said, net sales increased by 2.5 percent. For the 52-week 2016 fiscal year, net sales were 425.2 million dollars compared to 449.1 million dollars in the 53-week 2015 fiscal year.
Commenting on the company’s performance, Robert W. Humphreys, Delta Apparel’s Chairman and CEo said in a statement, “Over the last two years we have taken decisive action to reduce our fixed cost structure, streamline our business operations, and lower our production costs. By focusing on key growth areas, we successfully navigated through a tough retail environment and our fourth quarter highlights the momentum we have headed into fiscal year 2017. We expect the lower cost inventory that is now being produced at our manufacturing facilities to begin positively impacting our margins towards the end of our fiscal 2017 second quarter.”
Review of the full year and fourth quarter results
The company said, while 2016 fourth quarter operating margins were on par with the prior year quarter, earnings were impacted by costs associated with the recently completed manufacturing realignment that reduced 2016 fourth quarter earnings by 0.11 dollar per diluted share, to the reported 0.29 dollar per diluted share. Excluding these costs, earnings were 0.40 dollars against 0.53 dollar last year.
Net sales in fiscal year, Delta Apparel said, declined 0.5 percent from the prior year, when adjusting the prior year for the additional week of sales, the sale of The Game business and the discontinued Kentucky Derby licensed business for which the company did not seek renewal.
Operating profit was 16.3 million dollars or 19.2 million dollars after adding the 2.8 million dollars of realignment-related expenses compared to 16.1 million dollars or 10.5 million dollars after excluding the gain on the sale of The Game business in the second quarter of fiscal 2015. Earnings per diluted share were 1.12 dollars or 1.41 dollars after adding back the impact of the manufacturing realignment against 0.57 dollar last year.
Basics and brand segment review
Net sales in the basics segment were 73.7 million dollars in the 13-week fourth quarter compared to 74.4 million dollars in the 14-week prior year quarter. Adjusting for the additional week of sales in the prior year quarter, net sales grew 6.7 percent, with sales increasing 5 percent in activewear and 34 percent in Art Gun. Gross margins expanded 440 basis points in fiscal year compared to the prior year, and expanded 480 basis points when adjusted for the manufacturing realignment expenses in the 2016 fiscal year.
Net sales in the branded segment were 40.7 million dollars in the fourth quarter. The company said, though most of the branded segment businesses exceeded the prior year sales after adjusting for the additional week in the 2015 fourth quarter, total net sales declined 5.2 million dollars from the prior year sales of 45.8 million dollars. The decline, it said, was due primarily to a 5.3 million dollars decrease at Junkfood, resulting from the impact of the additional week of sales in the prior year coupled with the soft retail environment that affected all channels of distribution.
Salt Life sales grew 20 percent over the prior year quarter, attaining 27 percent growth for the full year. Strong demand for the Salt Life brand continued with good sell-through of its spring line driving reorders and robust initial fall shipments. Sales on Saltlife.com grew 66 percent in the quarter and 71 percent for the full year. The Salt Life flagship store in Jacksonville, Florida, in operation for five years now, continues to increase its sales, with growth of nearly 20 percent in fiscal year over the prior year.
Soffe grew net sales in the fourth quarter, and after adjusting for the additional week in the prior year, increased sales by 8 percent. The Soffe growth was driven by expansion in the strategic sporting goods and e-retailer channels. The Soffe business-to-business ecommerce site, which we re-launched in May saw sales rise 5 percent in the fourth quarter and 16 percent during the second half of the fiscal year. Gross margins in the branded segment were up 20 basis points in the fourth quarter and down 60 basis points for the full year from the prior year.
“Salt Life is expanding its presence on the West Coast, with the opening of the Salt Life retail store in San Clemente, California. We have leased a location in Huntington Beach and anticipate opening this store in early calendar 2017. Although we anticipate the retail environment will continue to be a challenge in fiscal 2017, we can see that our strategic initiatives completed in the past year have created momentum that we expect to result in sales growth, expanded margins and higher profits in fiscal 2017 and beyond,” added Humphreys.
SummaryPicture:Salt Life