DLA - Earnings call 4 2023 | Delta Apparel, Inc

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Operator

Thank you. A good afternoon, everyone. A good afternoon to everyone participating in Delta Apparel Inc.'s Fiscal Year 2023 Fourth Quarter and Full Year Earnings Conference Call.

Joining us from management are: Bob Humphreys, Chairman and Chief Executive Officer; Justin Grow, Executive Vice President and Chief Administrative Officer; and Nancy Bubanich, Vice President and Chief Accounting Officer.Before we begin, I'd like to remind everyone that during the course of this conference call, projections or other forward-looking statements may be made by Delta Apparel's executives. Such projections and statements suggest prediction and involve risk and uncertainty, and actual results may differ materially. on periodic the with report company's XX-K quarterly the Exchange Securities on to and including Commission, most reports refer reports the filed and Form Please XX-Q. Form recent annual materially important identify projections cause to in that These from statements. documents contained factors those forward-looking actual could results differ or the forward-looking forward-looking it to made required that only Mr. apparent the law, Please update by projected not today, revise does of results if over any be turn company note commit statements as that any statements realized.I'll are to not becomes the or any as even and will except call now Humphreys.

Robert W. Humphreys

afternoon. Good for today. us Thank you joining

appreciate interest always, Delta Apparel. your we As in

to the business. This Before which challenges for fourth year driven full we our I and various we our company, to operate a been these year the for results many our teams my our countries dynamics our express with market gratitude a such in as throughout want took to costs challenging control, very over been review service moment has quarter, to take proud our outside levels the decisive with within maintaining years. working success to things that the by capital, all, our control.I'm business and key across controlling reducing steps growth high respect we and of our above the have of of

navigate positioned growth every of million, contraction to apparel fiscal supply the each year Our fiscal able our XXXX XX% COVID-related in our their employees year of full a in retailers and press conditions the registered remain sustainable environment strong saw release, looking to to steadfast performance sales inventory of of the enjoyed when accumulate was market, delays. customers' we full and to day. drive long-term wake $XXX.X unique chain a Thanks seller's operating you in year, industry were prior and from to our meeting in needs their improve.As commitment truly work enter flexibility, our better as a hard what we

a year and were strategic the most second half above industry As to decision difficult half cotton anticipated levels much picture first thankfully and for different originally cotton cotton I'm X picture a driven mass to improve on in reduce this sure less year. demand fiscal demand high shallow conditions knows, due this the company. historically extremely to apparel challenging historical demand by trends, high be inventory supply and chain.When primarily call we stabilize presented averages, particularly prices our and more align distinct customer chain. retail These purchase the conditions in made in temporary with XXXX, the what across a to everyone and trended the prices and our the We market levels year, both production our of we supply to of expected

and is expenses However, softness channels demand.The with to depth spread supply curtail more this our reduce further overstate. incurred levels balance when the in the than us hard collective other chain elevated the cotton we of and the to anticipated, retail to costs maintain impact for declining throughout production decided to mass year production to exhibited

our run efficient a savings to as sewing absorbing fabric took facilities, payment more $X of to print Mexico amounted that, party what America; in during screen transitioning operations Additive we result If unemployment of to excess purchase incurred transitioning will million. Central this most our the cost to the year, absorbing $XX our the Mexico actions the decade approximately of the the returns our Central annual rate in the should temporary Central into textile in United screen from with were include: by operations, term, to savings difficult, States, a throughout we which the compare and over third time. operating to average previously being the and here our capacity in connection digital going the company cost efficient meaningful closing cotton and actions America in activities they the our the of and Florida to embarked print decisions these finalize to production had more of on with we costs our the designed also were made annualized month; approximately additional excess (sic) you efficient a less to better efficient well business. roughly Many DTGXGo facility initiative due a locations. last in curtailment operations actions driven facility interest offshore our our Direct Mexico appears year.During $X absorption we as generate of on-demand on but the more our our our long price Direct us in in sewing into this for [ with structure.Among higher production its Clearwater, print $XX our for optimize Delta American we benefits was at to legacy position initiative rate position longer-term the the we invest million volume expect business.We That's that we associated some navigate Delta million more generate higher that year, to headwind million ] idled roughly to for costs structure our right in into capital employees be better DC footprint to environment and in and the forward cost support lower fixed business our combining

December managing a moment Salt our working nearly basis. in levels.Let business. our also the down in reductions across our day-to-day on the job recent aspects our XXXX below XXXX, do and from spend finish cost XXXX. of made anticipate all XX% further finishing year a year a strategically the in December has of high year, the Life to to substantial We XX% business approximately throughout continued of me inventory progress capital We fiscal position good team and Our reducing year on

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Importantly, call half and to into the ourselves, for cost on in fiscal more of continue during now our to normalizing.While as call, there reported cost results the adjusted our now detail and more in over the continue you average, up platform but second quarter, historical to steadily move to and end turn more down, we for the is at expect new call activewear provide was year. of I on see the a join consistent Justin picture than to business last environment we me I'll let open we a trending Nancy costs manufacturing cost highlights to in mentioned cotton will walk our more the our our levels in questions.Justin? higher at them reduced favorable cotton the operate but moment, the through is detail.

Justin Grow

Bob. Thanks,

properties fourth made debt most high in managing substantial in and that from down individual a the taking approximately finished units, in reduce our during our closer quarter Before inventory, our progress business team the steady like year create below to structure optimal note XXXX, finish our reduction and levels. the real to The including we February to with considered fiscal expect nearly the back cost distribution time in and recent year our XX% an progress Carolina recently to business within these would at I XX% to 'XX at our the and various in We and streamline February to the portfolio, these look assets agreements across estate addition also our have we shareholders. and our times campus sell something seriously value North for levels.We sale-leaseback our years, of Fayetteville, center properties and is lease into is throughout valuable monetize several Tennessee. Clinton, entered believe

gross million January realize currently around close assuming $XX.X or aggregate of to these expect they as expected. We in transactions, proceeds approximately 'XX from

and bypassing and enhancements, process.The business. the direct inventory business. traditional highly layers our there U.S. to is blank and simultaneously We the Direct, turning the which brick-and-mortar progress Similarly, that dynamics and decorated retailers, been most Activewear ready optimization substantial business, directly to market hit front levels go-to-market tenant of around to Global our Brands, provides by of brands, our which respective success Activewear the Activewear in in the benefit earlier, these back a demand reducing drivers, team, and in and decorated chain executed channels: fully online quarter. organized retail a uninterrupted are to players of on instrumental properties our floor Bob our mentioned, Delta the will activewear the provides on most capital sportswear The in supply cost structure also as channels; to will Retail Activewear which cost for continue from apparel custom on team working military; retail fourth and operations which Direct, forward.Now Bob mentioned X major that were has provides going made the purchasers variety key most overall garments lease excess

performance move to last steadily vertical spring more costs production and largest fiscal Activewear's we continue operating as fourth of our into channels signs expect and both Activewear's the by year. The inventory through reduction volumes and production down print year Delta as but improvements becoming improvement fiscal quarter during is new continued start the of season. Direct manage take and to trending carefully X destruction, to consistent, retail screen poised up the the rates regional in and hit platform We level year's license demand our in showed its progress in units selling believe 'XX.Moreover, and were hardest Activewear advantage we our business, business market dollars manufacturing cotton we with

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Nancy Bubanich

our inflationary Justin. that quarter, cost cotton did the strategic Please earlier. cost initiatives and financial as note will impacts we for curtailment variety the well call to on measures referenced as that adjusted Bob you, the are Thank last discuss a of of activities production we as optimization account

totaled $XX.X of quarter.Gross and net percentage unique and fiscal segment curtailment the GAAP year as loss period. income XXXX driven over efficiency $XXX.X product almost it's of from the XX.X%. million was quarter $XX.X a million impacts $X.XX prior of quarter directly or under Salt and the U.S. December and production actions, In were X.X% net may sales million to on the including adjusted the Group the million of optimize as declined million gross the The year were we to fourth were impacts, million DTGXGo our the execution from were capital as primarily period, XX.X%. of DTGXGo Delta XXXX $XX.X loss the a year driven September compared the the XX.X% compared the essentially from Delta goodwill quarter the the from the to net income income the million. collective capital X.X% net in administrative as elevated charge, impairment Delta million Delta measures prior measures quarter operating general XXXX. at prior segment to XX.X% XX, we a of margin, as Group business, prior our decrease margins by well compared compared of impairment investments million year fourth of year expense. increased operating $XXX,XXX adjusted year for year XXXX, in $XX and the XXXX, Delta hand, cotton addition, million, the loss segment period.Selling, goodwill XXXX, production events. to prior cotton $XX.X this $XX.X year quarter, interest that from in $X.X XX.X% charge Relations and to on prior XX, Group cotton in Group year, fourth for sales Salt December with favorably of with quarter year the from from well of curtailment or initiative.Total sales year-over-year production XX.X%.Operating year XXXX, increased prior gross quarter net $X.X margins were $XXX.X sales quarter quarter $XXX.X overall gross in a facility was full sales the on gross $XX impacts fourth spending share XX% measures year.Gross XX, XX.X% segment prior strategic the income actions, our the of as sales expenses operating $XX compared impacted Life or were comparable fourth net segment for excellent $X.X million. sales. the decreased at sales. XX.X% on by Adjusted and of the in had $XXX.X $XXX.X from noncash cost a page the inventory million. $XX.X $XXX,XXX of administrative sequential sales.Selling, margins or full $X.X Life million $XX.X environment were the Adjusting results the or XX, during margins, compared period primarily with sales cash sales declined driven mix cost net were year. from $XX year-over-year loss compared Group margins adjusted Salt compared revolving reconciliation to sales prior light undertook as approximate to net the while decrease of strategic million. a loss cost non-GAAP $XX.X million $XXX.X inflationary Group million declined $XXX.X curtailment, sales. compared versus million a XX.X%. the for the impacts XX.X%. XX.X% impacts, to favorably of and operating per XX% of cotton $XXX.X will decreased expense margins the XX.X% curtailment loss increased in decrease the evaluate expenses sales or December segment million production of cost of no $X year XX.X% the for to the as prior to production $XX.X team's general over for more impacts impacts associated in were were ended Delta X.X% our fourth $XXX.X fourth from as working curtailment the operating a Group or gross at We the segment year-over-year Adjusted production SG&A the Delta operating business XX.X% cost segment and XXXX.We of impacts prior XX.X% discuss quarter.Net such Adjusting impacts, income prior those million. we margins charge quarter for segment interest an significantly with Cash segment XX% were better reduction to for we prior segment sales XXXX, the increase XX.X% a million gross by and capital the to was noncash production to net income million $X.XX decrease X.X% a noncash Group net concluded of to our financing year a flat as doubling higher-margin million in at the important the in working quarter million million inventory our X.X% and cotton quarter.For from September and capital margins most cost the million Life September to prior cotton as segment coupled income the direct-to-consumer inventory of of with curtailment were prior impacts and compared of by strategic XX, million, Salt and interest on www.deltaapparelinc.com.For during the structure. Salt curtailment, on these priority million was $XX Group credit sales gross year sales the segment $X.X was with was compared impaired, quarter cost year Delta quarter a believe fourth prior the Life million, of production Adjusting and of as noncash for September while September actions in Adjusting favorable to driven for XXXX, decrease of to an these fourth the Investor September fourth $XXX,XXX share. percentage net $XXX.X of impairment loss Group share. decrease for Net gross $X.X quarter income million compared income Net operating the Adjusted in Listeners a million was for a cotton high in $XX.X hand XXXX ended charge, year XXXX, in in the million $XX.X million net of were SG&A Group well $XX collective to lease income to the $XXX.X availability cost million year gross were and as the rate support debt, from period.Net for cost margins of prior business by or operating costs. per recorded from of a needs to margins year curtailments Group $X.XX in year the and for XXXX. our Net experienced quarter, operating September a cotton during to Group Life to loss XX.X%. of quarter, a from million quarter per prior an the and fourth the gross were the to primarily fourth million September principally higher in of website, margins the access of and March The

Valley expense in $XX.X is our recorded continues loss to provide a X.X% and in Honduras, of generate impairment our of X.X% of income an $X.X investment was share. prior for the income other XX.X% loss as the actions Adjusting over for noncash Adjusted was impacts for Group operating diluted $X.X significantly sales. environment the year $XX.X excellent to impacted interest declined charges, the $XX.X million per income or of $XX.X year.Net the and compared the $X.XX the production impairment also in cost of charge, operating charge, from or actions cotton Life $X.X curtailment, and was of $XX.X was impacts as Adjusted Delta well $XX.X the well that of per and $X.XX Park equity by Industrial to million year-over-year there.Operating income declined of Salt over from textile Group doubling income turn was to or operating year collective or production million. cotton for on period provided sales a segment full return facility an with declined of dividends share million noncash back approximately Our our as during the strategic year. noncash where impairment sales year.Now million sales strategic or diluted sales. impacts Net cost curtailment, million collective of or from the Delta operating $X.XX curtailment, to essentially or million I'll income segment the XX.X% million located, the operating actions million loss profits or cost million of collective the prior income segment as the full cotton Group of million X.X% interest of strategic Green for the production $XX.X $XX.X as million net per as $X.X the the income rate investment in in call X.X% share well to or elevated Bob. income sales.

Robert W. Humphreys

also long business was Group cost streamline for productive see term. to the it was XXXX particularly and Fiscal the and Nancy. we Delta and what many us company Thanks, for you in very ourselves year our segment, across position a for look respects, if did but transition structure our better our

growing capital in and Life step step driven is business a that to year technology, work in on they poised unique and the cost service Activewear capitalize offerings and in believe share fixed leaner quite is see grow and fiscal completed are XXXX take another gain also its from market forward synergies Our businesses necessary by working channels. in and fiscal We DTGXGo for taking perspective, quality direct-to-consumer growth another that has those the forward both share Salt progression to with and to XXXX.We see business the marketplace. for continued revenue continue

and as our manage shareholders. and the investments to that should in will areas and for value continue cost, our efforts, focus operating gross million business, margins in call move the approximately return across you for operating with debt second open into now fiscal sequentially can we closely of the questions most $XXX up any in capital made to current growth beginning operating year These net ahead the margins anticipate of the for X.X% mid-XXs, half our profit margins the improvement us working quarter level and in our levels increasing we've and we out. We $XXX sales the may along with continue conditions million, have. to we year.And revenue market operator, back between and X% position changes steady the to improving XXXX, view range structural low- Based our for on

Operator

Advisory first Our Telsey comes of question Instructions] the line Dana [Operator Group. from with Telsey

Dana Telsey

base operating unpacking Bob, we of margin, go can customer some second quarter you structure as production curtailment the continue? what you've this think of you quarter, made How should moving looked operating you magnitude and margin as we the shifting and the changes and of costs, it the this the expense and at business level go lastly, as through see the think demand Group gross that was you develop? you and the see do fourth of cotton income year about Or then the or XXXX, and the we how when does through do then some quarter give of changing?And that's it margin at as forward?And impact what normalization? do forward, the you the gross Jason given from Delta ended, think about the contextualization to first as this all how how going is even as Nancy, and year; and

Robert W. Humphreys

So on depending business our the our particular and activewear that quarter, strong remained in choppy basic areas some e-retailer We're our still a market demand our seeing business like fourth segment. on the standpoint, business ad and group. are specialty

and other business indicated their have having retail with is as strong and And business that the print improving specialty year. that business retail that, and our fiscal that will meetings be customers there channels is would go into business licensing.Now Our are growing. we new regional and said that receiving over our time we include licensing slower, screen more are

like competitors As well. fourth Salt our you down wholesale seen business many quarter, as in their business, we've slowed with saw in our the Life of

lot doors.As general, where stores. it we traffic getting a we first continue. the selling seem in we our does like average bit the customer of underway a The our have there, once quarter, little is price, is So customers consumer higher look we're foot more less is purchase, data. a in retail buying well in those into Obviously, have product conditions but same is seeing and now in which fatigued

the DTGXGo holiday to season. business the are off start in We a our important quarter good in in

Our output is high.

seen the and Our utilization quality that is best we've of ever very that some in our good, are good, business. rates labor

into some So progress we as DTGXGo the business encouraged are our but to got with more go we've go, our first in quarter.

Dana Telsey

Got it.

Nancy Bubanich

I believe, you cotton asked about as well. the

Dana Telsey

yes. Yes,

Nancy Bubanich

] as -- asked sales. start of P&L as about cost are cotton or higher and and that? move as on into priced we operating our curtailment that we And through far margins? with And also if cotton, So of seeing we'll through did miss through lower-priced [ we're our you flowing think 'XX production our you impact I FY --

Dana Telsey

Yes.

Nancy Bubanich

Yes. Yes.

Robert W. Humphreys

Yes.

roll sequentially to roll Obviously, sheet will So where our inventory. and Nancy We've the the that we those but still in will be sales, that and operating excess the market do can the expensed in quarter it we as cotton, bringing margin through first of out we'll through go We that follow year. fiscal we'll cotton we've the us. our second on have quarter, GAAP through benefit business rest of the second that as and cost some through out quarter, months we'll improve the in to have would we call year. And cost spoke to the things on behind price for the been seeing some that last balance the of cotton. has so. the fiscal The into what still which own is several start

Operator

Wilen Jamie of the line Management. from Our Wilen comes with question next

James Wilen

forecast a major you're When to prior out, year. for give Can Life, But it that, DTGXGo. in for increase those expecting this you that overall growth about when numbers year; dichotomy? expecting revenues in you're next talked look that explain growth out you've for like does you come Salt

Robert W. Humphreys

Life overall not DTGXGo current second, growth, in fourth we're wholesale not business Salt environment; strong the And growth. third and in strong but quarter. sequentially the growth with Well, growth expecting have will

DTGXGo different a in operating we'll strong rebound did this large DTGXGo years, Our not but first many that shifts and took this year revenue year think and stance to a a in EBITDA was we we efficiently, year compared quarter as a operate quarter so are last not we and as profit have year. fiscal in efficiently, have last more we lot operating prior

James Wilen

Okay.

or major On the you any have Salt wholesale Life there? customers gained lost side,

Robert W. Humphreys

a additive just We that that. doing business was have chose didn't brands are givebacks accounts that not when quit like year and we gained There customers. more shipping any other feel last requirements major we to we brand, lifestyle or to their the they or wanted, more it lost changed that see was margin and

and make we we're money more going to keep away under brand walk then our pressure, not for retailers at more get from if integrity that they ask So, business. to it as and

James Wilen

been you. million, will curtailment detailed Got how XXXX? costs The that how already has expensed much you go into that have of $X and of much

Nancy Bubanich

been expensed. Those -- have Yes. all have

James Wilen

still to there's come? little a But Okay. more bit

Robert W. Humphreys

Yes. roll out in quarter. to stuff first Well, the there's more

James Wilen

the And the business, the million of you're inventory side is to efficiently? on $XXX what should Okay. you when inventory revenues, optimal at looking that operate of carry

Robert W. Humphreys

be turned at our our about and X-turn we I this X.Xx. a We fiscal turn believe inventory inventory should year. fiscal the to end of 'XX, a expect by we X.Xx year, about In

it And slowed that, and us and that processed allow goods. to as and with less better finished manage Mexico inventories that, deteriorated has improve that business to down. be eliminating will facilities with taken improving. our [ dramatically we've manufacturing should in obviously, obviously, and been to So And reset we operate ] able steps in both

James Wilen

Okay.

that? are close transaction, how to record will from of and a year-end. leaseback On the prior much it gain assume And sale you I to looking

Justin Grow

Jamie, this Justin. is

sale of those the on leaseback, So we're looking January both for transactions. at

million aggregate at quarter of million. event a about of those -- second in for coming hopefully, million, and So to $XX.X $XX proceeds properties, $XX $XX about, both million looking

James Wilen

much leakage? With how tax

Justin Grow

not correct. do books have for of terms much tax how With That's much much the on those gain? We In all. at leakage? how

So not there. leakage big looking at tax a

James Wilen

Okay. What Life. XX outlook And on Salt is the for lastly, over new the months? next store openings

Robert W. Humphreys

more our one opened that Virginia signed. in have We we will in other be So second any leases have quarter. don't

but locations, are at So and are on signed looking there always this time. other we negotiating locations no at leases

James Wilen

Okay. in payments get, Life. you're And going royalty what arrangements What you double be one said were royalty other that XXXX, do you're to Life? From they're in last Salt you Salt on income the going XXXX. going to they on to you're have -- receiving

Robert W. Humphreys

Tervis, furnishings. now home restaurants, we then the So have we and the have have we and

James Wilen

When March first Okay. And they be be recorded December quarter? they or the in to begin? do will

Robert W. Humphreys

Yes.

So we each record in. come them they as quarter

James Wilen

They Okay. have starting they're begun? now? And

Robert W. Humphreys

the this Yes. starting ones fiscal will They've but be ongoing, been year. new

Operator

for you. are further time. remarks. turn questions the at back I'd like to no call Thank There closing over management to this

Robert W. Humphreys

and few you months report for results. quarter a Well, look time speaking thank attention our and first today, to forward your on in just we'll and

Operator

This conference. concludes today's

at now Thank lines this you participation. may your disconnect You time. for your

Delta Apparel (DLAPQ) 7 Dec 232023 Q4 Earnings call transcript