Delta Apparel Increases Sales, But Earnings Decline

Delta Apparel (asi/49172), a Top 40 promo products supplier, increased sales in its fiscal third quarter but net earnings declined year over year amid mounting cost pressures.

The Duluth, GA-based apparel provider reported Aug. 4 that total net sales across all of its business divisions for the three-month period ended July 2 rose 7% compared to the same quarter last year, reaching $126.9 million.

The increase included a 3% rise in the company’s Delta Group. Among others, this division houses Delta Direct, a business channel that services clients such as promotional products companies/screen printers, e-retailers and retail licensers.

While Delta Group increased overall, Delta Direct revenue declined, although the company said this was mainly due to a reduction in market demand for activewear primarily in the retail license business, rather than the promo channel. Delta’s DTG2Go – an on-demand, direct-to-garment digital print and fulfillment provider – is part of the Delta Group division and grew sales compared to the previous year’s Q3 and 2022’s Q2.

Meanwhile, total company operating income for Q3 2022 decreased to $9.3 million, or 7.3% of sales, compared to the prior-year third quarter profit of $11.9 million, or 10% of sales.

Company-wide, net income was $6.2 million, or $0.88 per diluted share in Q3. That compared to the previous year’s net income of $8.2 million, or $1.14 per share.

“During the quarter, the impact of higher cotton prices, energy and freight costs were the largest drivers of margin pressure,” Delta Apparel noted, adding that selling, general and administrative expenses (SG&A) were $22.4 million, or 17.7% of sales, compared to $19.9 million, or 16.8% of sales, in the previous year’s 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,” the company said. “In addition, distribution costs were higher primarily due to increased wages.”

Robert W. Humphreys, CEO and executive chairman of Delta Apparel, feels the company performed well as economic headwinds like inflation and potential recession began to blow stronger. “Overall,” he said, “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.”

Based on estimated 2021 North American promo product revenue of $46.7 million, Delta Apparel ranked 34th on Counselor’s most recent list of the largest suppliers in the industry.

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