Delta Apparel Releases Fiscal 2016 Fourth Quarter, Year-End Results

Supplier Delta Apparel, Inc. (PPAI 188431) has announced its fiscal 2016 fourth quarter and year-end results, reporting that all of its businesses, with the exception of Junkfood Clothing, experienced sales growth during the fourth quarter, ending October 1.

The 2016 fourth quarter comprised 13 weeks while the prior year fourth quarter included an additional 14th week because fiscal year 2015 was a 53-week year. Net sales for the 13-week fiscal 2016 fourth quarter were $114.4 million, compared to $120.2 million in the prior year’s 14-week fourth quarter.  Removing the additional week in the prior year, net sales in the fiscal 2016 fourth quarter exceeded those in the comparable 2015 period by 2.5 percent.

For the 52-week 2016 fiscal year, net sales were $425.2 million compared to $449.1 million in the 53-week 2015 fiscal year. Net sales in fiscal year 2016 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 in fiscal year 2016 was $16.3 million, or $19.2 million after adding back the $2.8 million of realignment-related expenses (including $1.1 million in cost of goods sold and $1.7 million in restructuring costs). This is an improvement over the prior year operating profit of $16.1 million, or $10.5 million after excluding the gain on the sale of The Game business in the second quarter of fiscal 2015.

“We are pleased with our fourth quarter financial and operational results, and are excited about what our accomplishments mean for the future of the company,” says Robert W. Humphreys, Delta Apparel, Inc.’s chairman and CEO. “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.”

Humphreys adds, “During our fourth quarter, we fully implemented our manufacturing realignment at a cost of about $0.01 per share less than we originally anticipated. 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. We continue to expand our output, which should allow for inventory levels that better support our growing catalog business this spring. We are also producing open-width fabrics, and are meeting our $2 million cost savings goals for this initiative.”

Net sales in Delta Apparel’s basics segment were $73.7 million in the 13-week fiscal 2016 fourth quarter compared to $74.4 million 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 in the fiscal 2016 fourth quarter, with sales increasing five percent in Activewear and 34 percent in Art Gun.

Its branded segment returned net sales of $40.7 million in the fiscal 2016 fourth quarter.  Although nearly all 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 from the prior year sales of $45.8 million. The decline was due primarily to a $5.3-million 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. After reducing the prior year quarter for the additional sales week, Salt Life sales grew 20 percent over the prior year quarter, attaining 27-percent growth for the full year. Soffe grew net sales in the 2016 fourth quarter, and after adjusting for the additional week in the prior year, increased sales by eight percent. The Soffe growth was driven by expansion in the strategic sporting goods and e-retailer channels.

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