Delta Apparel expects to report a near-40% drop in third-quarter net sales compared to last year amid the Covid-19 pandemic but CEO Robert Humphreys says the business is recovering faster than originally anticipated and is likely to return to profitability in its September quarter.
In its preliminary results statement for the three months to 27 June, the activewear and lifestyle clothing maker says it anticipates net sales to total US$72m, or 60% of net sales of $119.3m in the prior-year period.
It adds its monthly sales performance sequentially accelerated throughout the third quarter from April sales at 32% of prior-year levels to June sales tracking at about 90% of prior-year levels.
“The momentum we have experienced across our business segments as the third quarter progressed is encouraging and further validates Delta Apparel’s strategic advantages, including our diversification of sales channels, our broad geographic footprint, and the strong emotional connection our Salt Life and Soffe brands have with consumers,” CEO Robert Humphreys says. “During the last few months we have seen orders accelerating and coming from a broader base of sales channels.”
The company cites a significant increase in direct-to-consumer sales during the third quarter, including e-commerce sales that more than doubled compared to the prior year, led by sales growth of more than 140% on the Salt Life e-commerce site and 80% on the Soffe consumer site.
“The third quarter was unprecedented for our nation, our industry, and our company,” Humphreys notes. “While our non-US manufacturing operations were closed for most of the quarter, we are encouraged that by the end of June we had resumed production at all of our manufacturing plants.”
Delta Apparel expects to record approximately $24m of non-recurring expense during its fiscal 2020 third quarter associated with impacts from the pandemic.
Humphreys adds: “Our business is recovering much quicker than we originally anticipated, and we believe this momentum will continue, allowing us to return to profitability in our September quarter.
“Each month our liquidity has continued to improve, resulting in a nearly 50% increase in our cash on hand and availability under our credit facility at June compared to the March levels. I remain confident Delta Apparel is in a solid financial position to emerge from this pandemic stronger, and we are ready to profitably grow our business.”
The company will report its final financial results for the third quarter on 30 July.