Delta Apparel (NYSE:DLA), Inc. (NYSE American: DLA) discussed its Fiscal Year 2023 Fourth Quarter and Full Year results, acknowledging a challenging year with a 14% decrease in full-year sales compared to the previous year. The company reported net sales of $415.4 million and an operating loss of $29.4 million for the year. Despite these challenges, CEO Bob Humphreys expressed optimism for the future, citing strategic decisions to reduce production costs, optimize cost structures, and lower inventory levels. The Salt Life business, a standout performer, received an unsolicited offer, and the company is reviewing strategic options. Delta Apparel anticipates improved market conditions and is focusing on driving long-term growth, with expectations of sales growth in fiscal year 2024, especially in the Salt Life branded retail and e-commerce channels. Additionally, the company is making progress in reducing debt levels and plans to monetize real estate assets.
Key Takeaways
- Full fiscal year sales reported at $415.4 million, a 14% decrease from the prior year.
- Operating income for the year showed a loss of $29.4 million, with a net loss of $16.4 million or $2.34 per share.
- Strategic decisions made to control costs, with additional costs of $34 million for the year.
- The Salt Life business is exploring strategic options following an unsolicited offer.
- Market conditions expected to improve, with a focus on long-term growth.
- Net sales for Q4 were $91.4 million, with a gross margin of 11.2%.
- Net debt reduced by 15% to $165.3 million from March 2023.
- Fiscal year 2024 sales projected between $400 million and $415 million, with operating profit margins between 2% and 3.5%.
Company Outlook
Delta Apparel is focused on a return to top-line growth in fiscal year 2024, with an emphasis on the Salt Life brand's retail and e-commerce channels. The company is also investing in direct-to-consumer channels and expects sequential growth in its DTG2Go segment. The projected net sales for fiscal year 2024 range between $400 million and $415 million, with operating profit margins anticipated to be between 2% and 3.5%.
Bearish Highlights
The company faced significant headwinds with high cotton prices and low demand leading to high inventory levels. This resulted in a strategic reduction in production and an operating loss of $29.4 million for the year. Additionally, the company expensed $8 million in curtailment costs and anticipates more expenses in the first quarter of the next fiscal year.
Bullish Highlights
Delta Apparel's military business, as well as the Retail Direct channel, showed signs of improvement, with certain customer segments outperforming. The Salt Life business generated significant operating profitability, and the company expects sales growth in fiscal year 2024. The e-commerce website sales for Salt Life grew significantly, and new retail stores expanded the brand's footprint.
Misses
The company missed its net sales target for the fourth quarter, reporting $91.4 million compared to $115.5 million in the prior year. Gross margins also fell to 11.2%, and the company experienced a net loss of $16.4 million or $2.34 per share for the quarter.
QA Highlights
In the question and answer segment of the earnings call, it was clarified that while there have been no major customer gains or losses in the Salt Life wholesale business, the company made a strategic choice to stop shipping to certain accounts. Furthermore, the company aims to improve its inventory turnover rate to 2.5x a year and is pursuing a sale leaseback transaction expected to close in January.
Delta Apparel remains committed to maximizing shareholder value through strategic investments and operational improvements. The company's various business units are poised to benefit from market improvements and strategic initiatives, with a clear focus on driving long-term growth and profitability.
InvestingPro Insights
Delta Apparel, Inc. (NYSE American: DLA) has had its share of challenges, as reflected in the full fiscal year results. To better understand the financial position and future prospects of the company, a look at the real-time data from InvestingPro can provide additional insights.
InvestingPro Data indicates a market capitalization of $62.18 million, suggesting a relatively small player within the industry. The company's Price / Book ratio as of the last twelve months ending Q3 2023 stands at 0.37, which is considered low and could be attractive to value investors. This aligns with one of the InvestingPro Tips, which notes that Delta Apparel is trading at a low Price / Book multiple. Additionally, the company has experienced a revenue decline of -9.21% over the last twelve months as of Q3 2023, a trend that is of concern and corroborates with another tip that analysts anticipate a sales decline in the current year.
Investors looking for growth might be wary of Delta Apparel's performance, as the company's revenue growth for Q3 2023 was reported at -16.2%, further emphasizing the challenges it faces. While the company's strategic decisions to optimize cost structures and focus on growth are encouraging, these figures suggest that turning the ship around might take some time.
For those considering an investment in Delta Apparel, there are additional InvestingPro Tips that could be of interest. The platform lists a total of 11 more tips, which can provide deeper insights into the company's financial health and market position. For instance, Delta Apparel's net income is expected to drop this year, and analysts do not anticipate the company will be profitable this year, which are crucial considerations for potential investors.
To access these insights, investors can explore the InvestingPro platform, which is currently offering a special Cyber Monday sale with discounts of up to 60%. For an even better deal, use the coupon code sfy23 to get an additional 10% off a 2-year InvestingPro+ subscription. This could be an opportune time to gain access to a wealth of financial data and analysis to make more informed investment decisions.
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