On Thursday, Duluth, Georgia-based Delta Apparel Inc. reported financial results for the fiscal 2012 first quarter ended October 1, 2011.
First quarter highlights:
- Net sales increased 14.5 percent to a record $123.5 million.
- Gross margins improved 130 basis points to 25.3 percent.
- Operating profit improved to 5.4 percent of sales from 2.7 percent of sales in the prior year period.
- Net income increased 167.7 percent to $4.4 million from $1.6 million in the prior year period.
- Diluted EPS increased 163.2 percent to $0.50 from $0.19 in the prior year period.
Sales for the three months ended October 1, 2011 increased $15.6 million to a record $123.5 million. Each business unit contributed to the 14.5 percent organic sales growth in the quarter. Gross margins improved to 25.3 percent compared to 24.0 percent in the prior year first quarter, with margin expansion in both the branded and basics segments. Selling, general and administrative expenses were 19.9 percent of sales, an improvement of 130 basis points compared to 21.2 percent of sales in the prior year first quarter.
“We just completed a strong first quarter to begin fiscal year 2012,” said Robert W. Humphreys, chairman and chief executive officer for Delta Apparel. “Each operating division increased revenues, contributing to the 14.5 percent organic sales growth during the quarter. Demand for our brands, licensed properties and decorated merchandise continues to grow, which allows us to ship higher value product to our retail partners and directly to consumers through our e-commerce sites. Our manufacturing facilities are operating efficiently and we are leveraging our fixed costs on higher volumes to improve our profitability. We anticipate continued revenue growth in the upcoming quarters, although we expect our profitability to be negatively impacted with our highest cost cotton flowing through cost of sales in our second and third fiscal quarters. Despite these less than ideal conditions, we expect to generate earnings growth in fiscal year 2012.”
Branded segment sales for the first quarter were $70.9 million, a 21.5 percent increase from the prior year first quarter sales of $58.4 million. Gross margin improvement, along with better leveraged selling, general and administrative costs, drove an increase in operating income to $5.1 million, or 7.2 percent of sales, compared to $2.8 million, or 4.8 percent of sales, in the prior year quarter. The basics segment had sales of $52.6 million for the quarter ended October 1, 2011, an increase of 6.2 percent compared to the prior year first quarter, driven by sales growth in both catalog products and private label programs. The revenue growth resulted from a 17.3 percent increase in average selling prices partially offset by a 9.5 percent decrease in unit sales.
The first quarter of fiscal year 2012 continued the rollout of higher priced cotton in cost of sales; however, the company expects that its highest cost cotton will flow through cost of sales during its second and third fiscal quarters. Higher selling prices, coupled with improved manufacturing results and the ability to leverage general and administrative expenses, resulted in operating income of $1.6 million, or 3.0 percent of sales, compared to $0.2 million, or 0.3 percent of sales, in the prior year first quarter.
For more information, visit Delta Apparel’s corporate website.
