Published April 30, 2012
After a year of record sales in 2011, Delta Apparel Inc. said today that it is likely to report a loss for its fiscal year ending June 30 due to high cotton prices.
The Greenville-based company said net income for its fiscal quarter ended March 31 dropped nearly 67% to $1.9 million, or 22 cents per diluted share. That’s down from $5.7 million, or 65 cents per share, in the prior-year quarter.
Net sales increased slightly from $125 million to $125.5 million, but Delta said soft retail sales led to lower promotional pricing and impacted gross margin, as did slower sales of military training gear. Delta Apparel is an international design, marketing, manufacturing and sourcing company with a portfolio of branded and private-label activewear apparel and headwear.
Company Chairman and CEO Robert W. Humphreys said he is disappointed in the third quarter results but sees market improvements that should boost Delta’s results in 2013.
“The inordinate cotton price increases of 2011 that created so much turmoil in the marketplace are now moderating,” Humphreys said. “As the higher inventories in the marketplace are worked through, sales volumes should return to a more normal growth pattern, pricing should stabilize, and we would envision a better business environment going forward.”
Delta saw sales reach record levels in 2011, as the company reported a 42% spike in net income of $17.3 million.
But for the 2012 fiscal year ending June 30, the company said net sales are expected to range from $475 million to $485 million. That’s down from previous estimates of more than $500 million.
Delta Apparel said it anticipates a loss for the 2012 fiscal year of 15 to 20 cents per diluted share. Income has been hindered by high cotton prices in 2011, but Delta said it expects better results in 2013.
“In the meantime, we have taken several steps to reduce costs and better position Delta Apparel, Inc. for next year,” Humphreys said. “We have completed our investment to bring all of our branded businesses under one enterprise system, providing service efficiencies and cost savings. We are adjusting our manufacturing output to manage inventory levels to market conditions. In addition, we are moving several functions in our private label business offshore to streamline operations which should enhance service levels to our customers and reduce costs. While some of these initiatives have short-term costs which will be incurred in fiscal 2012, they should provide long-term benefits that we will begin to recognize in fiscal 2013.”