Delta Apparel Reports Fourth Quarter and Full Year Fiscal 2022 Results

Annual Net Sales Rise 11%; Full Year DilutedEPS $2.80

DULUTH (Ga.), November 17, 2022–(BUSINESS WIRED)–Delta Apparel, Inc. (NYSE American : DLA), a leader in lifestyle and activewear products, and digital printing, announced today financial results for the 2022 fiscal fourth quarter, and its full-year ended October 1, 2022.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “We are pleased to announce results marking our second consecutive year of strong organic growth. Our diversified approach to market strategies and our vertically integrated manufacturing, service and platform platforms enabled us to navigate an economic and business environment that is constantly changing. In fiscal 2022, all five market channels, Delta Direct, Global Brands and Retail Direct, DTG2Go and Salt Life, saw year-over-year growth.

Our Delta Group segment saw solid growth in regional screen printing and ad specialties businesses. We also noticed an increase in interest in supply chain solutions in Global Brands channels and Retail Direct. With a double-digit increase in sales, DTG2Go’s print-on demand business continues to expand. The order volume for the digital first strategy is exceeding our capacity. This important area of growth is still a priority for us. We are determined to increase our output.

Salt Life’s segment had another record-breaking year in terms of operating and sales results. Overall sales surpassed the previous year by 21%. The Salt Life brand’s ability to connect with consumers across its many marketing touchpoints led to organic growth in all three Salt Life omni-channel markets – wholesale, retail and eCommerce – in the fourth quarter. The year ended with 21 Salt Life-branded retail locations open across the U.S. coast, from Southern California up to Key West, and all the way to the east seaboard until Rehoboth Beach (Delaware).

The story continues

Our near-shore, vertical manufacturing platform allowed us to respond quickly to market fluctuations and adjust production levels in order to control inventory costs and manage inputs. We are currently planning to run some of our facilities below full capacity for the first half 2023 in order to better match overall demand.

He concluded that Mr. Humphreys was “extremely proud” of his associates for their ability to adapt to changing needs. Their hard work and dedication enabled us to enter our fiscal year with a highly resilient business model that is flexible and adaptable, ready to take on the opportunities and face the challenges.

This is the fourth quarter that ended on October 1, 2022.

• The net sales reached $115.5million, which is a slightly higher figure than the $114.7 million in prior years. Salt Life Group net sales increased by 15.6% over prior year, while Delta Group net sales decreased 1.1%.

• Gross profit stood at $21.6 million, which was $26.5million in the preceding year. The gross margins fell 440 basis point to 18.7%. The Salt Life Group’s gross margin improvements offset the decline in Delta Group’s segment due to higher input costs for its Activewear, DTG2Go and unabsorbed fixed manufacturing cost. In the September quarter we began to reduce production of basic tees, which led to $1.1 million in unabsorbed fixed cost.

• Selling, general and administrative (“SG&A”) expenses were $19.8 million, compared to $17.7 million in the prior year period. SG&A expenses as a percentage of sales increased 170 basis points to 17.2%, compared to 15.5% in the prior year period. This was due to an increase in selling costs as a result of the Salt Life store expansion, and increased distribution labor costs.

• The operating income for the quarter was $2.2million, which is a decrease of 78.0% compared to the previous year. As a result, net income for the quarter was $0.3million, $0.04 per diluted shares. This compares with net income in 2016 of 6.9 million, $0.96 per per diluted.

Here’s the complete list of events for the year that ended on October 1, 2022

• From $436.8million in the previous year, net sales rose 11.0% to $484.9million. Over the previous year, net sales for the Delta Group and Salt Life Group segments rose 9.8% to $484.9 million and 20.8% respectively.

• The gross profit increased 6.8% from $101.9 million to $108.8million. The decline in Delta Group’s segment, partially offset by improvements in Salt Life Group’s segment, led to a decrease in gross margins of 22.4%. This was a 90 basis point decline from last year.

• Selling, general and administrative (“SG&A”) expenses were $79.5 million, compared to $70.7 million in the prior year, driven by selling costs associated with expansion of Salt Life’s retail footprint and higher distribution labor costs. SG&A expenses as a percentage of sales were relatively flat at 16.4%, compared to 16.2% in the prior year.

• Operating income totaled $31.8 million. That’s 6.6% versus operating income of 32.7 million and an operating margin 7.5% for the preceding year.

• In comparison to the net income of $20.3million or $2.86 each diluted share for the preceding year, $19.7million was net income.

The total net inventory was $248.5million at the end of last year, as compared with $161.7million a year earlier. An increase in stock levels year-over-year is due to higher input costs that impact materials, transport and labor.

At year-end, total net debt (capital lease financing, cash on hand) was $170.6million, as compared with $121.7 million one year earlier.

Conferencing Call

Today at 4:30 PM, Company senior management will be participating in a conference phone call. They will discuss financial results. ET. You can join the conversation by calling 877-704-4533. To call from other countries, please dial 201-389-920. A live webcast of the conference call will be available at www.deltaapparelinc.com. To register for the webcast, and to download the software required, please visit the site at least fifteen minutes before the call. The replay will be accessible until December 17th, 2022. Participants can access the replay by dialing toll-free at 844-512-2921. International callers may dial 412-317-66671. For replay access, dial 13733708.

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. It is the market leader in direct-to-garment digital printing and fulfillment. The company brings its DTG2Go technology to customers’ supply chains and innovations. The Company is a leader in the sale of casual and sports products via a range of channels and tiers. These include independent and specialty retailers, sporting and outdoor retailers, superior department stores and mid-tier retail stores, mass merchants, ecommerce websites, U.S. military and business-to-business 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 8,600 people worldwide. Additional information about the Company is available at www.deltaapparelinc.com.

Warning about Forward-Looking statements

Forward-looking statements in this press release could contain risks and uncertainties. There are many factors that could lead to actual results being different from what was expected or predicted. These include the U.S. economic situation and any government/social measures taken to control it. The impact of COVID-19 on the U.S. economy, our financial position, liquidity and financial investments. Our ability and ability of customers to pay their bills on time and in an efficient manner. We also have to consider the risks and uncertainties outlined in our “Risk Factors”, which were filed with the Securities Exchange Commission. They have been updated in our quarterly reports on 10-Q. Delta Apparel, Inc. disclaims all obligation to make forward-looking statements other than as required by law.

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