Delta Apparel, Inc. (AMEX:DLA) Q4 2022 Earnings Call Transcript

Bob Humphreys: You know we don’t disclose the different margins within a segment. So €“ and I would just say again, our average selling prices are the highest they’ve been, but DTG2Go is not necessarily a higher margin business, but there’s just very little selling and other costs associated with it. And so you know it has margins similar when it’s running well to our basic Activewear business, maybe slightly lower, but then it has a much lower SG&A component.

Unidentified Analyst: Understood, thank you. And just one more question, with companies presumably seeing the attractiveness of on-shoring and faster turn times and less stepping out and buying a lot of inventory. Is there €“ are you seeing a shift from some of the major customers that could absorb some of that capacity that isn’t being filled right now?

Bob Humphreys: Well yes, so one thing that’s interesting to think about and understand about this business is it’s still a fairly seasonal business. You’ve got a big component of it that’s driven from seasonal merchandise around the holiday period. So you know our strategy for years has been to work on building this out into a more level business. And we’ve tended to make pretty good progress as the years have gone and that is one of the beauties of the Fanatics business. Is while you know it definitely peaks in holidays, but the sports events that they support and the leagues run year around. So it is much more of a year-round business. So, I think you will see us be more strategic in what types of businesses that we do want to take on, where we can continue to work on building our year around business versus just installing more equipment for a peak period of time.

Unidentified Analyst: Great! Thank you very much for that.

Simone Walsh: Thank you.

Operator: Our next question comes from the line of Jamie Wilen with Wilen Management. Please proceed with your question.

James Wilen: Hi! So seasonality wise, I assume the Christmas quarter, the current quarter you’ll be starting to run flat out at full capacity, certainly between Thanksgiving and Christmas.

Bob Humphreys: Yes, we’ve already really been running flat out for several weeks now. But I think in the last four or five weeks we’ve made some progress on productivity gains, training and adding more people so that we can get more run hours out of the same equipment.

James Wilen: And then seasonality wise, the Fanatics business will obviously lessened the seasonality, but what percentage of capacity do you think you’ll be able to achieve throughout the remainder of the year, not just the Christmas quarter.

Bob Humphreys: I don’t have a good answer for you, you know in front of me, to be honest with you. And how you define capacity is fluid. It depends on how many shifts you’re going to run and how many days a week you’re going to run, and so I think we’ll have plenty of capacity. You know once we get past probably into January, February, I think we’ll still be running very full on our digital first strategy through that period of time, and then we’ll start slowing up a little bit on output until we start gearing back up for the fall.

James Wilen: The CapEx that you’re going to spend in the business in this fiscal year, I assume that’s just on machinery and not additional bricks and mortar.

Bob Humphreys: Exactly.

James Wilen: Okay. And then moving over to Salt Life, we’ve opened up a whole bunch of stores in the past year. Were they all profitable? And then could you comment on the same-store sales of the existing stores that already achieved a very decent level of volume and profitability, and are you actually able to increase the sales of those stores as well.