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October 05, 2023

Delta Apparel Could Sell Its Salt Life Brand

Word on the Top 40 supplier’s possible sale comes as another apparel maker, HanesBrands, is also looking at possibly offloading one of its major brands – Champion.

By  Christopher Ruvo

A couple of weeks ago, HanesBrands (asi/59528) announced it might sell its Champion brand.

Now, another major apparel maker with a big presence in the promo industry is considering selling one of its flagship brands.

signing contract agreement

Delta Apparel (asi/49172) announced that it’s evaluating a bid for the potential purchase of Salt Life, an ocean-lifestyle-inspired clothing brand that the Top 40 supplier has owned for a decade.

The Duluth, GA-headquartered company said the offer was unsolicited. It did not identify who made the bid. Delta Apparel is working with financial services company Baird to assess the feasibility of a potential deal, but cautioned that it’s not a certainty that Salt Life will be sold.

“Our board of directors and management team are committed to maximizing value for Delta Apparel shareholders, and we believe it is in their best interests to conduct a thorough review of strategic options for our Salt Life business given the widespread interest in it,” said CEO Bob Humphreys.

Delta Apparel said it’s not commenting on the possible sale or evaluation process until its board of directors approves a specific transaction or otherwise concludes its review.

Salt Life Success, Recent Delta Struggles

Founded in 2003 in Jacksonville, FL, by four watermen, Salt Life has been a success story for Delta Apparel, executives said. The company acquired Salt Life in 2013 when it was what company leaders described as primarily a regional wholesale brand.

These days, Salt Life generates more than $60 million in revenue, with items sold in over 1,700 wholesale doors across 48 states and direct-to-consumer via a growing e-commerce site, as well as 25 branded retail stores spanning the U.S. coastlines from California to Florida to New York.

Delta Apparel’s Salt Life sale consideration comes amid what’s been a difficult year for the apparel maker, which sells into markets beyond just promo and offers print-on-demand services.

In August, Delta Apparel reported that sales are down 12% through the first nine months of its fiscal year. The company has sustained a nearly $17 million loss during the period, which ended July 1.

Executives said the loss and sales decline are, in part, due to a drop in demand that’s occurred following a heavy inventory stock-up by retailers and other carriers of the firm’s apparel in the prior fiscal year. That inventory ramp-up by customers happened after stock levels dropped during the supply chain-challenged days of the COVID-19 pandemic.

Based on estimated 2022 North American promo revenue of $49.6 million, Delta Apparel ranked 37th on Counselor’s most recent list of the largest suppliers in the industry.

HanesBrands To Sell Champion?

Amid a rough financial stretch, global apparel manufacturer HanesBrands is currently undertaking a strategic review of Champion, which includes looking at a possible sale.

The Winston-Salem, NC-headquartered company, whose products sell extensively in the promo products space, had a challenging second-quarter, reporting in August that total global sales in fiscal Q2 fell 5% compared to the same quarter in 2022, to $1.44 billion. Meanwhile, gross profit dropped nearly 16% to $483 million, and the quarter ended with a loss of $22 million, or -$0.06 per diluted share.

That downbeat showing continued a poor run of financial form for HanesBrands. For the full year of 2022, total global sales across all business channels declined 8.3% year over year to $6.23 billion. Gross profit plummeted more than 16% to $2.22 billion. For 2022, HanesBrands posted an after-tax loss of $127.2 million, or -$0.36 per share. Stock price was reportedly down 51.6% in the last year, according to a late-September assessment.

Given such a performance, there’s been considerable shareholder pressure to set things right, which makes it unsurprising that HanesBrands could sell Champion, JustStyle reported.

“Hanesbrands has been struggling for a while and is being dragged down by excessive debt,” GlobalData Retail Analyst Neil Saunders told JustStyle. “As such, it was always going to have to make some kind of move to sort out its financials.”

HanesBrands has said its strategic review of Champion is not an assurance that it will sell or pursue “any particular transaction or other strategic outcome regarding” the brand. The company has not set a timetable for completion of the review and may end it at any time.