Despite a pick-up in holiday demand for apparel, US activewear maker Delta Apparel saw its net losses widen in the first quarter, as a one-off tax charge and a margin decline in the basics segment weighed on results.
For the quarter ended 30 December, net losses reached US$9.95m from $607,000 in the year ago quarter. During the period, the company recognised a discrete provisional tax expense of $10.6m associated with the recent US tax reform legislation, which impacted earnings by $1.45 per share.
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Gross margin for the quarter improved significantly within the branded segment, expanding to 37.2% from 31.1% in the prior year period. This was offset, however, by a margin decline in the basics segment due to higher raw material costs, resulting in an overall gross margin of 18.1% from 20.6% in the prior year period.
Net sales, meanwhile, reached $90.3m from $85.3m a year ago, boosted by a 20% increase in both basic and activewear segment sales. The latter was boosted by significant increases at both Catalog and FunTees.
In the branded segment, sales grew 14% year-over-year to $17.2m, after excluding sales of $9.4m in the prior year period from the company’s since-divested Junkfood business.
“With double-digit growth across the board and improved operating earnings, we are pleased with our results in what is usually our most challenging seasonal quarter,” said CEO Robert W. Humphreys. “While the pick-up in holiday demand for apparel was an encouraging development, we believe the time and effort our team devotes to marketing and omni-channel strategies, operational improvements and cost-control initiatives were also key success drivers for us during the quarter.”
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