US' Delta Apparel records 7% growth in net sales in Q3 FY22

The Salt Life segment net sales grew 30 per cent to $20.9 million compared to $16.1 million in the prior year third quarter, the company said in a media release.

Within the Delta Group, segment sales increased in the Global Brands business with both revenue and unit expansion with an expanded array of value-added service offerings. Sales in the Delta Direct channel declined following the reduction in market demand for activewear primarily in the Retail License business.

In the digital print business, DTG2Go increased sales over both the third quarter of fiscal 2021 and the second quarter of the current year, benefitting from the demand for the company’s digital-first technology and growth in installed capacity.

The strong sales performance in the Salt Life business was driven by double-digit year-over-year growth in both the wholesale and retail channels. Continued strong bookings from wholesale partners and the successful opening of four new Salt Life stores in the quarter led to year-over-year sales growth. Largely driven by constraints in inventory available, Salt Life’s sales in its e-commerce channel were down year-over-year; however, web demand has accelerated sequentially with sales increasing over 40 per cent from the second quarter of 2022.

On a consolidated basis, third quarter gross margins were 24.2 per cent, declining 130 basis points from 25.5 per cent in the prior year, largely due to inflationary cost pressures, which are now flowing through the cost of sales. During the quarter, the impact of higher cotton prices, energy, and freight costs were the largest drivers of margin pressure.

Selling, general, and administrative expenses (SG&A) were $22.4 million, or 17.7 per cent of sales, compared to $19.9 million, or 16.8 per cent of sales, in the prior year third quarter. The increase in SG&A expenses was primarily driven by higher variable selling costs and travel expenses compared to the same period last year. In addition, distribution costs were higher primarily due to increased wages.

Operating income in the third quarter of 2022 decreased to $9.3 million, or 7.3 per cent of sales, compared to the prior year third quarter profit of $11.9 million, or 10 per cent of sales.

Net income was $6.2 million, or $0.88 per diluted share, as compared to prior year net income of $8.2 million, or $1.14 per share.

Net inventory as of June 2022 was $227.7 million, an increase of $30 million from March 2022 and $75.4 million from June 2021. The increase in inventory levels reflect planned increased production combined with higher input costs.

Total net debt and cash on hand was $162.4 million at June 2022, an increase of $9 million from March 2022 including capital lease financing. Cash on hand and availability under the company’s US revolving credit facility totalled $30.8 million at June 2022, a $4.4 million decrease from March 2022.

The company invested approximately $5.5 million on capital expenditures during Q3 FY22, substantially in continuing investments in digital print equipment and Salt Life retail store openings, compared to $3.2 million during the prior year third quarter, the release added.

“Overall, we made good progress in the third quarter with a solid performance as our team stayed focused on our long-term strategies while simultaneously managing through a changing economy and consumer expectations. Our manufacturing investments have created scale efficiencies and platform flexibility positioning us well to continue to grow our business,” said Robert W Humphreys, the company’s chairman and chief executive officer.

Fibre2Fashion News Desk (KD)