First Quarter Fiscal 2024 Results Unveiled by Delta Apparel

Delta Apparel, Inc. (NYSE American: DLA), a prominent provider of core activewear, lifestyle apparel, and on-demand digital print solutions, has disclosed its financial outcomes for the first quarter of fiscal year 2024, concluding on December 30, 2023.

Robert W. Humphreys, the Chairman and Chief Executive Officer, acknowledged the persistent challenges faced by the company in the first quarter, aligning with the adverse market dynamics experienced in the activewear industry over the past year. Despite these challenges, the company has taken decisive measures to enhance its financial position by reducing debt and inventory levels by over 20% year-over-year. Furthermore, efforts to consolidate offshore manufacturing operations and streamline the workforce have been underway, with a particular focus on aligning costs with the current lower demand.

The Salt Life business exhibited sales growth during the quarter, driven by robust performance in direct-to-consumer channels and the successful launch of a retail location in Virginia. However, the overall activity in the Activewear segment faced sluggishness across its go-to-market channels, with global manufacturing capacity excess contributing to pricing pressures. While the DTG2Go digital print business demonstrated improved operational metrics, the overall demand during the holiday season fell short of initial forecasts.

Humphreys emphasized the company’s commitment to managing liquidity and working capital efficiently in the face of flat market demand. The strategic evaluation of options, prioritizing shareholder interests, and the planned monetization of the real estate portfolio through a sale-leaseback transaction remain key aspects of Delta Apparel’s focus.

Financial Highlights for the First Quarter Ended December 30, 2023:

  • Net sales totaled $79.9 million, a decrease from $107.3 million in the previous year.
  • Gross margins were 10.9%, or 12.6% adjusted for production curtailment costs.
  • Selling, general, and administrative expenses slightly decreased to $18.6 million, but SG&A as a percentage of sales increased to 23.3%.
  • Operating loss increased to $4.9 million, or $2.8 million adjusted for production curtailment and restructuring costs.
  • Net interest expense rose to $3.6 million from $2.9 million in the prior year.
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) showed a loss of $1.3 million, turning positive at $853 thousand when adjusted.
  • Net loss increased to $8.5 million, or $6.6 million adjusted for production curtailment and restructuring costs.
  • Net inventory decreased sequentially by almost $16 million, or 8%, from September 2023 and by $62.5 million, or 24%, year-over-year from December 2022.
  • Debt outstanding under the U.S. revolving credit facility decreased to $110.8 million, marking a reduction of $31.5 million from the prior year.
  • Total net debt, including capital lease financing and cash on hand, was $144.4 million as of December 30, 2023, reflecting a 26% reduction from March 2023 and a 22% reduction from December 2022.
  • Cash on hand and availability under the U.S. revolving credit facility totaled $7.4 million as of December 30, 2023.

Capital spending for the first quarter was $300 thousand, compared to $2.1 million during the previous year’s first quarter. The company is actively exploring additional liquidity options to support its operations and meet obligations specified in the U.S. revolving credit facility.

In conclusion, Delta Apparel navigated a challenging market environment in the first quarter, implementing strategic measures to enhance financial stability and operational efficiency. The company remains vigilant in addressing market dynamics, managing liquidity, and exploring avenues for growth and shareholder value creation.

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