Delta Apparel's Expanded Margins Enable Q2 Earnings Top Estimations

Delta Apparel, Inc. DLA second quarter results indicated a 5.76 percent drop in the bottom line as the top line fell 5.11 percent. However, the company's gross margin expanded to enable beat the Street analysts' expectations.

Delta Apparel reported net income of $3.44 million for the second quarter compared to $3.65 million in the preceding year quarter representing a fall of 5.76 percent. Its earnings also dipped 6.5 percent to $0.43 a share from $0.46 a share, but came in above the Street analysts' expectations of $0.41 a share.

The company's top line was $109.16 million, down 5.11 percent from $115.04 million in the previous year quarter. Street estimated revenue of $109.2 million.

Delta Apparel said its overall gross margins expanded 510 basis points from the prior year quarter and 270 basis points sequentially. Its operating profit was $5.9 million, or 5.4 percent of sales.

The company's Chairman and CEO, Robert Humphreys, said, "The strength that Delta Apparel has shown in the first half of this fiscal year is a testament to the effectiveness of the strategic initiatives we announced 18 months ago and the ability of our team to successfully implement them. While conditions in the retail apparel marketplace have shown little improvement, we have made significant progress both financially and operationally. Delta Apparel is now more streamlined and focused on areas that offer the greatest potential for profitable growth. We have significantly upgraded our manufacturing capabilities, improved customer service and expanded our product offerings. As a result, we have seen higher demand for Delta Apparel products, lower manufacturing costs, and significant margin expansions in each of the last four quarters, along with increased profitability."

He continued, "Looking ahead to the second half of our fiscal year, even with continued sluggishness in the retail marketplace we expect continued gross margin expansion and modest top line growth driven by anticipated market share gains and trends we are seeing toward a more profitable sales mix. We also expect to build on the high double-digit growth of our B2B and B2C sites in our second quarter and see continued strong growth in our ecommerce business. These expectations, combined with our ongoing fixed-cost reduction efforts, point us toward a solid second half of the year and a bright future for Delta Apparel."