Delta Apparel sees 7% growth in net sales in Q3 FY22

Delta Apparel, a leading provider of core activewear and lifestyle apparel products, has announced net sales of $126.9 million in the third quarter (Q3) of fiscal 2022 (FY22) ended July 2, an increase of 7 per cent compared to the prior year Q3 net sales of $118.7 million. Net sales in the Delta Group segment grew 3 per cent to $106 million in Q3 FY22 compared to $102.6 million in Q3 FY21.

The Salt Life segment's 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.

Operating income fell 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.

“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 CEO.