US activewear maker Delta Apparel is taking steps to find alternative supplies for some performance products and accessories to mitigate increased tariffs on products imported into the US from China.

Speaking to analysts as the company released its fourth quarter results, CEO Bob Humphreys explained: "We currently store small amounts of performance products and accessories from China for our various brands, which can be affected by increased tariffs. We are currently taking steps to find alternative supply chain for these products."

While he did not detail specific products, the imposition of additional tariffs on US imports from China has so far not directly impacted apparel. However, they do cover all textiles, travel goods, hats, and select accessories and machinery used in domestic US manufacturing.

"We currently manufacture the vast majority of the products we sell from our locations in Central America, Mexico and the United States. We also manufacture a significant amount of apparel for other major brands from these same facilities," Humphreys continued.

"You've heard me say for many years now that we see more production move into this hemisphere to service consumers in this region. This has been a long term trend that should help drive continued production growth in our manufacturing facilities."

Solid performance

The comments came as Delta Apparel reported a "solid" fourth-quarter performance after booking a rise in both profit and revenue despite disruption from hurricanes at two of its major distribution centres.

In its results statement yesterday (15 November), the company said it has re-aligned its reporting segments and now refers to them as the Delta Group and the Salt Life Group. The Delta Group is comprised of the company's DTG2Go digital print business as well as its Delta Activewear business and Soffe brand. The Salt Life Group is comprised of the Salt Life and Coast lifestyle brands. 

Net income in the three months ended 29 September totalled US$3.1m, an increase of $1m from $2.1m in the prior year fourth-quarter. Gross margin improved 240 basis points to 20.6% compared to 18.2% last year.

Net sales, meanwhile, increased 2% to reach $92.9m, up from $91.3m in the prior year period. The Delta Group drove the sales increase, with revenue up 4%, partially offset by lower sales in the Salt Life Group.

For the full year, net income totalled $1.3m but, adjusted for the $10.7m tax expense associated with the recent tax reform legislation, was $12m, compared to $10.5m in fiscal year 2017, which included the gain on the sale of the Junkfood business realised in the second quarter of fiscal year 2017.  

Gross margins improved in both the Delta Group and Salt Life Group, but declined 30 basis points overall from the stronger mix of Delta Group sales. 

Net sales for the year were $395.5m, up 3% from $385.1m in fiscal year 2017. Excluding $15.6m of sales in the prior fiscal year from the Junkfood Clothing business, which was sold in March 2017, net sales increased 7% compared to the prior year.  

Delta Group net sales reached $356m, up 9% from $326.6m in fiscal year 2017, while Salt Life Group revenue totalled $39.4m, up from $58.5m in the prior year, with the decline due to the since-divested Junkfood business and other strategic shifts in non-core business. Sales of the Salt Life brand were up 2.4% for the year, driven from the recent wins with national retailers and the company's direct-to-consumer business, partially offset by softness with independent retailers, which were hurt by the hurricanes a year ago and again this year.