Delta Apparel, Inc. (NYSE MKT: DLA) today reported that for its fiscal 2014 second quarter ended March 29, 2014, net sales were $114.5 million versus $120.1 million for the comparable 2013 period. The 5% sales decline was due primarily to unseasonably cold weather throughout the country and the weak retail environment prevailing for most of the quarter. Selling, general and administrative expenses as a percentage of sales improved to 18.6% in the 2014 second quarter compared with 19.7% in the prior year period as a result of the cost reduction measures implemented during the last several quarters. Operating margins in the branded segment improved 160 basis points from the prior March quarter, but this improvement was more than offset by depressed margins in the basics segment from lower selling prices on basic undecorated tees coupled with higher raw material costs. This resulted in a net loss for the 2014 second quarter of $763 thousand, or $0.10 per diluted share, compared with net income for the prior year quarter of $1.6 million, or $0.19 per diluted share.
For the first six months of fiscal 2014, net sales were $214.5 million compared with $226.8 million in the prior year period. The Company experienced a net loss for the 2014 first six months of $2.4 million, or $0.30 per diluted share, compared with net income of $1.7 million, or $0.19 per diluted share, in the prior year period.
Basics Segment Review
Net sales for the basics segment were $64.1 million in the 2014 second quarter, a 5% decrease from $67.4 million in the prior year period. Private label sales were down 17% as some customers reduced shipments of products because of slowness at retail and changes in product strategy. Sales of catalog basic tees increased 2% based on a 7% increase in unit sales offset by a 5% decrease in average selling prices. Weak market conditions for undecorated tees resulted in significant price discounting and a shift in sales mix to drive volume growth. This, coupled with higher cotton costs, lowered operating margins in the basics segment by 370 basis points to 1.7% of sales in the 2014 second quarter.