DLA - Earnings call transcript Q3 2018

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Operator

Thank you for holding, ladies and gentlemen, and good afternoon everyone, participating in Delta Apparel’s Fiscal 2018 Third Quarter Earnings Conference call.

Joining us from management are Bob Humphreys, Chairman and Chief Executive Officer; and Deb Merrill, Chief Financial Officer and President, Delta Group.

Before we begin, I would like to remind everyone that during the course of this conference call, projections and other forward-looking statements may be made by Delta Apparel’s executives. Such projections and statements suggest prediction and involve risks and uncertainty, and actual results may differ materially. Please refer to the periodic reports filed with the Securities and Exchange Commission, including the company’s most recent Form 10-K. factors those cause or contained important differ results forward-looking identifies from materially in document that actual could to statements. This the projections as even as will that today to company projected update note any results any statements not becomes commit made Please forward-looking apparent revise statements, any forward-looking does not realized. and, it by required only except or law, if the be are of that being is recorded. call Today’s Mr. now and Officer, I’d the Chief to call Chairman Delta’s turn over Executive Humphreys. Bob ahead, go Please sir.

Bob Humphreys

fiscal sales The was accomplishments productive combined you. improvement quarter Thank XXXX year-over-year another further important period third with into Apparel growth with the that drive for and Delta should in future. both earnings,

the saw Our growth wins, these growth customer primarily branded quarter, product solid introductions all in for quarters. set upcoming across further while sales for Basics the stage our new to segment businesses, segment in gains grow the

of most and Our of quarterly good a strategies evident in results. job team and business our on impact our year-to-date the to continues the efforts to is focusing with those do success potential

space and host into see extensions, broadening a new base growth our from products including expanded and the initiatives, activities. We continue customer introduction to and the print incremental category digital direct-to-consumer of of of investments

line. increased Activewear saw Delta demand sales great in Catalog major enthusiastic growth especially Our to basics business continues, margin of channels label third both and the Catalog its this of a again Platinum significant all market’s higher-end strong with growth and private at had quarter with fashion high business. FunTees, sales our our once response Delta the over sales made strides year. The products double-digit merchandise

leverage Western a unto lead our fleece fixed further cost. to quicker. Platinum Delta Hemisphere strategic their levels and private which and manufacturing brought customer The strong, to way manufacturing including seeing manufacturing shorter continue of times, we quarter, diversify brands their benefits, to chain as of supply sourcing and are market platform, and retail and our on service label production products the improving remained their benefits of number internal a enhanced retailers the and During footprint fundamentals provides focus get

trends launches new upcoming reminder quarter print As Art for period a the FunTees business of its digital quarters. anticipates partner was brand procurement continue, DTGXGo, customer is which several named in an and direct-to-garment The base is these exciting evolving formerly Gun. progress our as

was and The gone third customers. process of quarter on first DTGXGo’s quarter was with integration to large able existing some customers acquisition company and business operation, full business. extremely since has recent several The of expand well, combined new the the bring the also

the During DTGXGo facility into U.S. the population located with digital United shipping. DTGXGo reach campus. North capacity This Carolina new fourth and nearly our to of DTGXGo’s can expanded fulfillment one opened and their also now reach print on Soffe Fayetteville, increased its two-day in facility States. XX% quarter, Northeastern the

sales quarter quarter. see further digital fourth its to the space, its in position through and leading excited We’re the strongest seasonally into we strong anticipate and strengthen DTGXGo momentum print first

through up the channel, sporting were first with growth offset resulted fiscal lower which The the decline but XXXX. the box quarterly in quarter, retailers third military from channel. fluctuating the months for sales declined goods always big nine and sales Soffe of mainly independent

print digital print another single and for is customers location the Soffe from store. footprint print a North development opportunity of offer DTGXGo The opening and Soffe new a headquarters. consumer to fifth Greenville, market a digital on exciting DTGXGo quarter creates brand’s the Carolina, solutions with new Soffe also a direct-to-consumer both the in this location. The stores Soffe expanded key and unique traditional for campus again, located fulfillment and its blended near yet retail branded

wet cold for with digits our sales weak driven flat up new brand for end strong by and year-over-year. Southeast. We about e-commerce in well growth quarter April in national to double at prior once with started quarter The again, to and rebounded third sales the May Salt retail account business, June the year. The with quickly our continues Life perform

is the States We and continue to accounts is Life extensions now growth has the brand grow California so opportunities doors Salt newest fans. expanding retail Salt Life’s encouraging. well The and is categories lifestyle additional brand’s time. indicator Life’s national regional with extremely with they in performance these adding at over increased Beach, grant as direct-to-consumer Sales that are see quarter, and perform across new and Daytona the sales into another strong the stores store during in Salt new a brands Salt popularity, for customers Florida many the examples of Southeast. brand merchandising geographic brick-and-mortar particularly accounts in product in resonating continues Life’s and and XX% the performed United well. other of retail with markets to outside gaining

the XX% area. were retail and Bay XX% year-to-date. Florida Our in additional for planned two up fall the stores this for California in Tampa An is quarter the store up market

as performance products Salt price that continues to become request and opportunities categories. Another independent of Life. no products the opportunities and sales stores, retailers areas agreement to fixturing Salt also the the recently license these in Show was are previously Salt the least, through expanded through sold product cost number beer, repeated in and quarter, line brought house Life retail An operated are a and throughout available a and retail create to Life is trend Life of locations entire space grocery And growing during Lager we licensee, Life’s Salt The are the over in exterior visibility who located represent at and recently in ahead also brand merchandising quarter. owned was of introduced brand. their building in was Salt and quickly Salt Life This to coastal USA. to markets, of which line, but added response key dedicating was growth Salt during but of Florida. and fall. phenomenal initially and this incremental continue category been third-party the Tampa of Higher be to Life SWIM new opportunities Swimwear large introduced becoming branding. will and mainly not new in the introduced a to floor craft accessories stores. customer promising all locations, And Salt through have woven brand targets This exclusively selection carry also but seeing swimwear sales point ladies’ retail they for was to bags date. growing unique at line outlets devote signage Salt line. new of is eyewear, launched apparel years, and many with was schedule substantial Florida, sales Miami These new with Life only brand’s Lager, the potential, the market the creates retail not the brand piece Jacksonville, last, in larger such Life restaurants all locations expansion Miami the

provide quarter market. the our beer distribution discussion are to to the broader currently will results. limiting sales believe we of be Merrill available, third now over the I’ll turn to Florida Deb eventually key we details financial Although

Deb Merrill

Bob. Thanks,

million the per per from while prior $XXX.X net prior share, with $X.XX $X.X year improvement our sales last share million We’re X% million a Net in period, quarter. $XXX.X overall year. year very in was income or increased nearly over performance to $X.XX the pleased the diluted third X% diluted

XX.X% compared to XX to quarter basis Third in the to points million, gross $XX.X XX.X% profit quarter. increased improving prior year X%

strong our and Before to I commerce in year-to-date. segments both third and discuss individual our highlight the I e- businesses, performance wanted quarter

For and XX% XX% sites. on the year-to-date sales growth bringing consumer sites sales e-commerce year-over-year, quarter, XX% on were our overall XX%, our up including growth up BXB

about on sites to being unlike e-commerce further excited and grew double-digit prices. costs our on net both growth sales fully third burdened We’re sales strength million, year. during were distributing strong Sales sites the with sales in grew the selling Activewear growth basics being increased enhanced from XX% FunTees. the product. Catalog e-commerce, from all higher $XX.X after prior DTGXGo’s especially associated continued with DTGXGo. and of are both coming with volumes with quarter sales from up the our X% highly our the segment, In and businesses, operating XXX% many the because, and profitable sales higher increased quarter Activewear

business we’ve and mentioned, integrated platform. seamless and the Bob recent benefits the digital expanded us. our print As DTGXGo expanded with operating a platform, of customers acquisition the our our power and fulfillment of Seeing

several launching before others addition, year-end. in process new during customers of the are and launched we quarter the fiscal In

their to were brick-and-mortar to in new retailers excited compared e-retailers, reaching business million outside the integrate to branded sales channels We’re new revenue segment as XXXX in as quarter. coming stream. only well of want that traditional million on-demand with third an Net $XX.X sales in solution promotional products fiscal $XX.X the about

As Bob Salt before year-to-date. of about driver sales, much – mentioned, the due June a up declined debuted third but to minor the to sales temporary to which forward. sales year Salt are quarter quarter beer, craft quarter X% contribution Life’s the year-over-year, be quarter, the a more but few Bob Life were quarter, factors $X The million third X% from Soffe’s largely the third down sales referenced. new prior will expect quarter it end we days the going only had meaningful

$XXX.X Delta XXXX, million net sales to nine $XXX.X the first year million X% months the Apparel’s prior compared For period. increased to fiscal in consolidated of

period. we our X% prior Excluding March year year of the prior Junkfood in from business, our $XX increased year-to-date which over million sales sold the sales of XXXX,

of first per a legislation. provisional a connection recent $X.XX XXXX with As drove we share nine the for diluted discrete a tax $XX.X our expense tax quarter, loss reminder, months. in fiscal This million first reform recorded the in

spending third quarter $X.XX of up the approximately bringing comp, we tax full $X.XX was XX% expect amortization, to of Total the XXXX last capital up non-cash for year-over-year fiscal impact share sale $X.X Depreciation per the excluding third our million was spending the on be XX% nine-month Junkfood the law, approximately onetime $X we share and Excluding gain to diluted year. per year-to-date $X.X million capital to and quarter year-to-date. for of in million. including the business new and and earnings year million, total $X.X million, approximately realized $XX the after were the

$XX.XX price of million. per share average of total XXX,XXX repurchases for common During the $X.X At the of the of shares million, total share approximately $X.X a a at at we share cost board purchases year-to-date and of cost to quarter, had of XX,XXX $X.X for we remaining. end our bringing an third repurchased our our quarter, an authorization of per shares average $XX million price stock

program. We range plan Apparel’s our not to value accurately reflect believe for share does continue to shares and our that enterprise current price repurchases continue Delta the true under

including shape third cash great ongoing strong in was investment the while to at the earlier, sheet quarter-end million, $XX maintaining our levels as lease up result the a balance inventory our year-over-year DTGXGo down end with customers. inventory $X.X million driven levels Total to in $XX.X from initial supply debt, Our capital was million chain million the financing, our of quarter, $XXX of service still lower from year acquisition. a about and recent at efforts

Now here’s Bob again for our comments. final

Bob Humphreys

Deb. Thanks,

first inflationary the through performance and seeing the cost at three quarters despite year in the the in our are the has we and been like overall we’re continuing we Our solid, shake-up business pressures where marketplace. of retail

our number fourth of company’s prospects beyond, traction the we remain very various optimistic about Looking a across seeing our quarter we’re given to initiatives and from businesses. our

our investments to incremental in efforts generate new we should direct-to-consumer product manufacturing higher believe development print well and platform Our channels that from and vertical business. continue will more we returns, growth the throughout digital our the known see space,

brand to and tremendous XXXX position to In the addition, told, strong Life growth heading good into finish categories. a additional continues geographically both believe offers we for as into Delta momentum the expand lifestyle new year. Salt it and All opportunities Apparel’s fiscal

you Now any try I Deb might to answer and be have. to will glad questions

Operator

Instructions] [Operator Capital from question We’ll take Partners. Roth Dave King with our first

Dave King

Good afternoon, and Bob Deb. Thanks.

Thanks. tariff alluded contribute? Has that I nice already longer to business, all? looking impacting out there. And source growth, that from how in extent what has playing terms you the of see if you then growth FunTees China both started do term, that to, near benefit the Americas? to that at is guess, To term this situation your On and customers

Bob Humphreys

as So for seen I war is a so particularly through long these their FunTees pretrade and all develop think brands products most process diligence There’s cycle fairly talk. we far, with them. on-boarding we’ve with go what their of they specific due

apparel most speaking, categories, about greatly from So and coming all that tariffs obviously I predated varies by kind Generally category. – there’s for high by think any country on was reasonably It Asia of talk tariffs. already.

make, impact just categories there’s been So that if the tariff see large so but increases, haven’t far, more to proposed we have generally on that, we’ll there speaking.

Dave King

then higher you sort you general That And – on level, growth Okay. of have quarters several helps. there. business, the of basics had

on Some about like feels it’s how been think that of you gain overall a I but well. the improvement versus gains economy do how your like share as much do feel share of the terms just part, is – it think amount it of does market? in you of And it fair in guess

Bob Humphreys

decorated say, and by to primarily prior driven levels our undecorated service been that’s share as this over think would consistent or as is I to gains, up in both and quarter certainly our anything date, maybe quality our areas. time, and much I

is in offshore put bit in unique up which our offer able marketplace. package people, are retail We people for printed vertical a a to

over fashion has a assortment good, customers. to off our level And lines and the come driven product And years and offering to primarily we’ve product we’ve broader of the marketplace there. So service our higher from that development our paying is number our I perception and we in broader expand work got I being a growth, changed no internal to doubt, performing of tees think products base think think, a done there. on basic then fashion-forward more and steady more to higher lot offer

Dave King

and starting do itself then kind effect to see correctly? – I sounds interpreting well you continuing. recently, of And is your Am as that it more the Okay. your comments an have like also economy

Bob Humphreys

well products that Again, note are and sometimes price improving economy, we’ve by fairly I good, a They whole historically expensive that. we but that seen in economy. work much get and low supply/demand equation so – so an Yes. of I’ll yet sell weaker even product go still at actually retail, they you more t-shirts if in so back mean, far, generally look, outrun point decorated that in.

Dave King

growth June? Okay. That’s in to sounds July like you there how to good you’re color. August, that relative it And performed has the the and far, that business thus Life, in then early Salt reaccelerate quarters. Do expecting have coming

Bob Humphreys

have don’t We yet. that

period. We’re But last saw really demand just July really finishing up the again, we slow in in after big a year. our spike April, over comp

retailers underestimated down performing whole and some when the completely go well going effect independents, have performing of fact, stores and by And generally, and were of rebuilt I Florida. grew Keys, well. offset in and stores probably hurricanes out there. the kind our retail Our getting national particularly been missed Florida in opened some selling now just South and over That’s into the we growing And been quarter. you of and, the really well think the to were these wiped season year,

general, retailers there say retailers, equity effect buyouts big last went who more So there I products over while some been anticipated. our overhang open see very but an that at immediately, bit them, what private a our not the some knew we we businesses to terms would have couple we tight we performing retail general years, then those how just And little headwinds are in hurting had for with degree. been in than buy to in there’s of through dollars

outside way marketplaces we’ll Life major regional We’re several new sporting goods putting for trial. of in that Salt be spring for geographic traditional also stores experiencing our

Dave King

Last to hear. great That’s one me. for

it how operating that profitability still revenue And military mainly close So for that? mid bit, of we are to little side are it down there the now? you Soffe, sounds targeting margins level? it. And Thanks. the went How single-digit the is and a like was

Bob Humphreys

slightly different above basically operating months. still minus we’re plus or breakeven, so Yes,

plenty work got to there. do we’ve of So

which were from through Our decline changeover military, ran cycle. and training a down, life up was product Navy and we through is going just its some product that

certainly work progress to a have here there, seeing military steady so pickup We’re as we’re left but I in demand of do. But sit making we think see. plenty the today, we’ll

Dave King

color my the taking out finishing for questions good Thanks and the year. and Okay. luck,

Operator

question Associates. We’ll take with Furst our from next Furst Joe

Joe Furst

what Could you business bit what that? could ideas a of your a little you are And How for congratulations big part about it quarter. a explain this sort for of beer? plans do you on Thank and good have your become?

Bob Humphreys

Well, thanks, Joe.

we for a about that a did to market times start. Life obviously for got of delivered the Florida had proper new so we’ll number quickly. expertise venture strong been we people it’s in had alcohol pitched initiative into We So XX% thought for and has It one over ultimately owned us something the some Salt us, We to license account in off that joint gotten that of market, a with brand. joint time. an that manner that pretty venture, extremely in

be a been About doors over to X,XXX in time. it The so going it are see Day in gets and broad to if as time strong, to has here. demand doors there. very Florida people buying a or Labor buy XXX we’ll by of restaurants, the those just far so over We’re are purchase have seeing novelty we’re audience continue

be or believe that transcends Salt of one product, important lifestyle it’s or of truly can whether we any an footwear So case, headwear, Life step really as brand this this beer. in or kind a apparel certifying that

Florida. monitoring future, And closely. for Salt the at in single-digits be to be revenue year. we’ll Life’s restrict And expect least the next beer on we would that high so revenue based we’re total seeing of we’ll that So foreseeable percentage what to far,

the out strong start that would in be an So year extremely box. first the of

Joe Furst

I you noticed continuing been $XX, buying the another around your area. noticed stock, I the down it buy quote cost, Are there? last stock average to in $XX and on I think, And in has own question, recently your Good. $XX, back was is

Bob Humphreys

don’t a as than from it a buyer. the standpoint, that fine. as We it like We we like dollar better $XX understand buyer, a are. We but

Joe Furst

Yes, opportunity, I’m think. it’s is tremendous amazed just that surprises – I low. I that your me, price stock a it

Bob Humphreys

you. Thank

Operator

next Wilen We’ll from Jamie Management. question take our with Wilen

Jamie Wilen

to numbers. Hi, wanted with fellas, start DTGXGo. nice I

You organic And growth for last DTGXGo Gun? mentioned that Art both businesses from up larger it year. in Was the than was what was quarter? those XXX% the

Deb Merrill

of than actually integrated you and because no, the on it’s break embedded see if Art and but can’t existing, growth smaller Jamie, is inherently size the organic how Gun, was DTGXGo acquisition so apart smaller overall really two there. we’re can one in than platform, Yes, the we our was slightly XXX% up them much

Jamie Wilen

seasonality And which that of becoming is part a overall should now business major be strongest its in you? quarter Okay. the the quarter – for fiscal

Deb Merrill

It’s gain with fiscal the is, quarter, far, up. our that that the But its continues – standpoint, quarter new by customers. to we’re in quarters it quarter. as it’s But then a season in first strongest the the other December quarter, that’s December at onboarding as on holiday well spikes revenue it one

Jamie Wilen

but Okay. most fiscal. our We profitable in – that the should in quarters, correct? four be first all Is

Deb Merrill

a in been four years we And Correct. have now. of that all in quarters profitable couple business for

Jamie Wilen

Okay.

And our quarters profitable is fourth which – of an a our and I most the so offset business, basic there? bit third to is, little assume, that’s T-shirt

Deb Merrill

is That correct.

So it is definitely seasonality. a nice offset to that

Jamie Wilen

have some be Okay. operating And of margin that be enjoyed you margin-wise, synergies with each should more than operating them of two together, now the separately? the both

Deb Merrill

seeing are Yes, we Yes. already. and that

Jamie Wilen

what margin business? can Okay. the targets from And any T-shirt that in be business, obviously different operating the for

Deb Merrill

that. mid-teen grow, certainly to got for that of business expansion of as type in And that seeing we’re those continues that’s Yes, margin. operating kind in opportunity

Jamie Wilen

Okay.

year last year’s Florida, August, that year the through business, last how you what how September quarter talk July, Texas, we’re you we there? last quarter how I’m forward, migrated against looking to and September get comparing year’s – the when as your hurricanes, and of quarter, back Going with about kind this can

Bob Humphreys

for through we our the then starting kind after weeks. the Texas where fourth of Yes, went there quarter, hurricanes of Labor of three Florida Texas, couple were so and Florida, Day a in couple earlier then a to back – in first, that back and weekend there in had

relates. on in an this obviously how was impact we’ll go that later it and us, but that year we as more quarter So the there, see had through

Jamie Wilen

more than affect Basics? uniformly all that Did or you brands throughout your Salt Okay. Life

Bob Humphreys

aftermath And more a that those it’s just be there, coast. five to one I business getting is or to because when don’t to think go damaged. these chains or anything, the stores. lot and independents Salt get to are because and people they hurricane XX – are time, part than there stores Yes, rebuild their a credit, then the those in the store visiting to up when owners of of they’re over of that is devastating yes, the Life, large But back to And seem open. resilient is they going obviously

Jamie Wilen

and no Okay. be their lines. Target’s And in to when one of that carrying of of Hanes state Do going brands to that how suggests And you where then, overall, private in factor or retail a both – longer the major the retail, label? state their in with does see that shift do branded labels? private we anything from announced Champion branded Delta product

Bob Humphreys

a is and have say in to I say definitely retailers private label sophisticated I’ll more would a going past. more the maybe done what So there than shift on private label,

return Now or retailers, now, too merchandising for go, much that, many see mistakes more you man, brands and then brands. a these oftentimes risk when done they realize, they you make a not this buy having they come or trends problem, is those having they taking said often bad those of such then all and see quality then and deal, decades have a to

and coming it going, we have benefited years. and So hurt been that strategy see the we both over and from

of built, think in that’s media I trends, juices control, that a helped when do general, with they big work have the product get then silhouettes the felt maybe do disappointed want different going, in someone – in I’d they private and brands say, why brands best you distribution to sold better with color, turned where to up myself. think brand where for like it build another to channels probably too they would the and development else you of lot label getting that of and and I sense better kind and I to in people there’s a retail-driven start can been retailers getting noise better people they creative more I’ll like a come their see environment and creative of boutique with business.

Jamie Wilen

of on lastly, Got new you. Salt beer, looks products, over the Life don’t brand – on that Life, products. endeavors your are And focus? that your number to sunglasses a obviously what And swimsuits, then lines do is to Is what going in for sight you are it a will major others’ make your like else be with Salt that but you putting brand?

Bob Humphreys

Well, to we true is that not key I think the flash is, legs an to the sensation. build and real want overnight be and long brand has and something

took supportive we when lifestyle like that that of mates, steering were brand, a we mats, thing. out feel so this a floor we wheel of lot categories covers, got dog And didn’t long-term of over strategy, sort

had I then, of we deeply was with a were market getting time example, had And with that, And felt footprint and to about that licensee distributor, on people are a that which partner. over right of sourced. some a outside there. felt product, in source the venture for critical spoke been did time Life we products asked that beer the and of experienced could selling built. so headwear out that for licensed are There They on seen we Salt to, joint lot we make the which all an to thing business so focused job and and those is a and in and is and eyewear so that experienced we time the we marketplace. ourselves. our same and is that years, did and like The coming build board, that product that lady’s we’ve people in eyewear wasn’t develop in-house the that better More the again also product that bring get expertise really people product a other had and us, we and able with other the eyewear back apparel performance kind of that in like we a quality of thought swimwear, good pulled was

with new Although performance I’ve on protection. are garment and characteristics of the introduced developing points moisture platform and about marketing UV we manufacturing those, management products trademark, or our either our in-house

Operator

[Operator Instructions] go Mayfax We’ll next with Investors. Louis to Moser

Louis Moser

good whether Did I anything. any don’t project or you just job. Yes, earnings sales? know missed I

Bob Humphreys

not out sales do put Lewis, and forecast. earnings No, we

Louis Moser

Yes, what said I just a very Thanks little so. else missed think I wasn’t so but I bit didn’t of sure, good. much. you everything sounds

Bob Humphreys

you. Thank Okay.

Operator

[Operator Instructions] at appears no further we questions have It time. this

Bob Humphreys

Okay. much year just full we and Thank thank you updating to very results few Well, for joining you our forward look a on our in all months. call, you.

Operator

gentlemen, and Ladies this your participation. conference. concludes appreciate We today’s

Delta Apparel (DLAPQ) 6 Aug 182018 Q3 Earnings call transcript