Delta Apparel Ends 2020 With Sales, Income Up
Delta Apparel, Inc. (PPAI 188431, S9) has announced financial results for its 2020 fiscal fourth quarter, which ended October 3. Net sales of $116.7 million were up 8.1 percent from the same quarter in 2019 at the Greenville, South Carolina-based supplier, and operating income for the quarter was up 70 percent year-on-year to $8.3 million.
“We ended our fiscal year with balanced growth across all of our businesses in the fourth quarter,” says Robert W. Humphreys, the company’s chairman and CEO. “The broad-based performance powered stellar results, including year-over-year sales growth of eight percent and a 70 percent improvement in operating profit. Our exceptional fourth-quarter performance resulted from strong execution at the operating level with a very quick ramp up in our manufacturing operations, demonstrating the resiliency and strength of our vertically-integrated supply chain model. Despite the numerous challenges we faced earlier in the year with the COVID-19 pandemic, I am extremely proud of what we accomplished.”
Net sales of $116.7 million in the quarter is up from $108 million in the same quarter in 2019. Net sales in the Delta Group and Salt Life Group segments increased 7.6 percent and 12.5 percent, respectively, over the prior-year period. Direct-to-consumer sales increased over 60 percent from the prior-year quarter, with growth on its branded ecommerce sites up 40 percent. Gross profit was $24.9 million, an increase of 8.9 percent compared to $22.9 million in the prior-year fourth quarter. Gross margin improved 20 basis points to 21.4 percent, which Delta Apparel attributes to favorable product mix, lower raw material costs, and manufacturing efficiencies and process improvements within the Delta Group segment.
Delta Apparel reports that selling, general and administrative (SG&A) expenses decreased $1.2 million or approximately 6.5 percent, compared to the prior-year fourth quarter, from cost controls across the company and integration efficiencies achieved within the Delta Group segment. This resulted in SG&A expenses as a percentage of sales improving 230 basis points to 14.8 percent, compared to 17.1 percent in the prior-year fourth quarter.
The quarter’s operating income of $8.3 million was up from $4.8 million in the prior year’s fourth quarter. Delta Apparel says that the 70-percent improvement was primarily driven by income expansion of $3.4 million in the Delta Group segment year-over-year. Net income for the quarter was $5 million, or $0.71 per diluted share, compared to $3.5 million, or $0.50 per diluted share, in the prior-year period.
Total inventory at the end of fiscal 2020 decreased approximately 19 percent to $145.5 million compared with $179.1 million a year ago, primarily driven by stronger-than-anticipated sales in the back half of the year following government-mandated closures that impacted manufacturing during the June quarter. Delta Apparel resumed manufacturing operations at the end of June and ramped up production levels quickly, reducing its start-up costs to only about $0.2 million, down from its original expectations of up to $3 million during the fourth fiscal quarter.
Total net debt, including capital lease financing, decreased $12.3 million to $122.2 million as of October 3, resulting in cash on-hand and availability under the company’s U.S. revolving credit facility totaling $47.1 million at September 2020 year-end, a $20 million improvement in liquidity from a year ago. Cash provided by operating activities in fiscal year 2020 was $31.8 million compared to $9.4 million for fiscal year 2019. Capital expenditures during fiscal years 2020 and 2019 were $13.6 million and $16.2 million, respectively.
“While uncertainty remains around the pandemic and general economy, Delta Apparel has a proven track record of successfully navigating uncharted territory,” says Humphreys. “As we enter our new fiscal year we are well positioned to capitalize on numerous market demand opportunities across our businesses. We remain confident that our diversified sales channels and uniquely-positioned business model place us on a strong path for continued profitable growth. I want to thank our teams for their unwavering support, hard work and dedication throughout this past year and as we continue executing on our growth strategies for the coming year.”