Delta Apparel Inc. managed to turn a first-quarter sales decrease into a surprise profit.
The company’s net income tallied $681,000 or 9 cents per diluted share, compared with a net loss of $4.2 million, or 53 cents, a year earlier. FactSet estimates were for a loss of 27 cents per share.
Net sales totaled $90.2 million, which was lower than last year’s $93.4 million, but better than the FactSet estimate of $89.5 million. Net sales were adjusted for the divestiture of The Game business it sold last year.
Gross margins expanded by 4.5 percent over last year’s fiscal first quarter with the operating profit increasing $5.4 million to 2.5 percent of sales, from a $3.2 million loss for the same period last year.
“We have transformed our Activewear business with new garments and fabrications to make it more responsive to current fashion trends,” said chief executive officer Robert Humphreys. “Additional products and colors have been introduced for spring delivery. Our manufacturing platform continues to improve and the investments we have made in new equipment are starting to pay off.”
Net sales in the basics segment grew 6.7 percent and Delta Activewear achieved 6 percent net sales growth, while catalogue sales increased 7 percent due to higher volumes coupled with a stronger mix of fashion basics. The Soffe brand business did experience a $2.3 million decline in net sales, which dragged down net sales for the branded segment. The company is launching a new B2B Web site during the quarter that will facilitate business with Soffe.
Delta said it is seeing positive momentum heading into spring. The firm’s Junk Food and Salt Life are both growing strongly. It is opening a new Salt Life retail store in San Clemente, Calif., similar to the flagship store in Florida. The company said it has the largest back order for Salt Life clothes than it ever has and that its e-commerce business was “on fire.”
The company will save $2 million with new equipment installed in its operations in Honduras. Humphreys said on the earnings call that they expect second-quarter earnings will show strong improvement and he is cautiously optimistic about the remainder of the year.