Delta Apparel Q1 sales fall due to slow demand, inventory woes

Chairman and CEO of Delta Apparel Bob Humphreys mentioned that the company’s efforts to restructure, which involved substantial workforce downsizing and withdrawing from operations in Mexico, have resulted in $20m in labor savings annually.

Despite reducing its overall debt by 22% and inventory levels by 24% year-over-year, the company encountered slow demand in its activewear division and inventory constraints.

Humphreys explained that while many Delta Apparel customers have de-stocked to more normalized inventory levels, “the activewear supply ecosystem as a whole still has some ground to cover to return to pre-pandemic activity levels.”

Fishing apparel brand Salt Life saw a $10.3m net sales increase compared to last year’s first quarter results, while net sales in the Delta Group overall declined to $69.6m.

Delta also reported positive developments, such as the expansion of the Salt Life brand, fueled by direct-to-consumer and online sales channels, as well as a possible sale of this successful brand.

The company announced the potential move back in October, when it said it was conducting a “thorough review of strategic options” following an unsolicited purchase offer for the Salt Life brand.

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Additionally, Delta Apparel is currently in the process of selling its North Carolina headquarters and has already completed a sale and leaseback arrangement for its distribution center in Tennessee.

Key results from Delta Apparel Q1:

  • Net sales were $79.9m down from $107.3m the previous year.
  • EBITDA was reported as $1.3m.
  • Net loss increased to $8.5m.

In Q1, gross margins fell to 10.9%, with the operating loss rising from $2.6m to $4.9m. The adjusted operating loss stood at $2.8m.

Humphreys added: “With the challenging start to our fiscal year and demand across most of our markets generally expected to be flat relative to last year, we remain tightly focused on managing liquidity and working capital across all aspects of our business and will continue to look for areas where we can generate efficiencies and further streamline operations.”