UPDATE: Ascendiant Capital Markets Downgrades Delta Apparel to Hold Following Q3 Results

In a report published Friday, Ascendiant Capital Markets analyst Elizabeth Pierce downgraded the rating on

from Buy to Hold. In the report, Ascendiant Capital Markets noted, “Yesterday after market, DLA reported Q3 results $0.27, a considerable miss to our $0.71 estimate. While $0.12 of the miss was due to higher cost cotton, the major reason behind the miss stemmed from the company's inability to leverage its fixed cost on lower sales, which we attribute to the challenging retail environment. Admittedly this isn't the first quarter where DLA's revenue has been down, but we believe it is the first quarter where it was down in all tiers and all channels in both segments. Albeit painful, we believe the disappointing results have paved the way for the company to right size its infrastructure. As such, the company is evaluating all underperforming business units, product lines and sales channels and is reorganizing its administrative structure at all levels to streamline decision making and information flow as well as reduce duplicative and excess fixed costs. Headcount reductions (which include the President and COO; however, this also means Chairman Bob Humphreys, who we credit for building the business, is back and now running day to day operations) should generate ~$7 million in annualized savings, with about $5 million recognized in FY15. Associated with the headcount reduction, DLA expects to incur approximately $2.5 million in severance related expenses in Q4.” Delta Apparel closed on Thursday at $10.89.