Delta Apparel, Inc.

For the first quarter ended December 30, 2023, net sales were $79.9 million versus $107.3 million a year ago. Gross margin was 10.9% compared with 12.7% in the prior-year quarter; adjusted gross margin was 12.6%. Operating loss was $4.9 million versus a $2.6 million operating loss last year, or $2.8 million adjusted. Net loss was $8.5 million, or $1.22 per share, versus a $3.6 million loss, or $0.51 per share; adjusted net loss was $6.6 million, or $0.94 per share. EBITDA was a loss of $1.3 million, while adjusted EBITDA was positive $853,000. Salt Life Group net sales were $10.3 million and Delta Group net sales were $69.6 million. Inventory was $196.3 million, down 24% year over year, and total net debt was $144.4 million, down about 22% year over year. Cash on hand and availability under the U.S. revolver totaled $7.4 million. Management did not provide formal next-quarter or full-year financial guidance, but said Salt Life is tracking to achieve sales growth for the full year and that gross-margin timing issues at Salt Life should reverse in the second quarter. The company also said it expects about $6 million in annual run-rate savings from restructuring when manufacturing volumes normalize.

Bob Humphreys said the company is still operating in a very challenging demand environment, especially in activewear, but emphasized that the restructuring program is largely complete and has made Delta leaner and more efficient. He highlighted major footprint reductions, workforce cuts of over 20%, and ongoing work to streamline operations, monetize real estate, and evaluate strategic assets including Salt Life. His tone was cautious and liquidity-focused, with repeated emphasis on protecting the balance sheet and unlocking value.

Nancy Bubanich detailed the quarter’s financial pressure: sales of $79.9 million, gross margin of 10.9%, operating loss of $4.9 million, EBITDA loss of $1.3 million, and net loss of $8.5 million. She noted that adjusted gross margin was 12.6% and adjusted EBITDA was $853,000 after production curtailment and strategic initiative impacts. On the balance sheet, inventory fell to $196.3 million, debt under the U.S. revolver was $110.8 million, capital lease financing was $20.3 million, other debt was $13.7 million, and total net debt was $144.4 million; capex was only $300,000. She also pointed to $5.4 million of gain on the Knoxville sale-leaseback and said higher interest expense, at $3.6 million versus $2.9 million last year, reflected the elevated rate environment.

Analysts focused on debt levels, the pace of liquidity improvement, demand trends in activewear, cotton-price impacts, and Salt Life margin timing. Management said there is “more to come” on debt and liquidity as it works with lenders and explores other funding sources, and acknowledged that additional liquidity will likely be needed in the near term to meet obligations under the U.S. credit agreement. On activewear, Bob Humphreys said demand is roughly close to where it was a year ago—still not strong—and that cotton prices have risen 12% to 15% from recent lows but remain below the peaks seen 18 months ago. On Salt Life, he said the lower gross margin was partly an accounting timing issue tied to inventory receipts and should reverse in the second quarter.