Clothing has always been a business that’s dependent upon demand. A company might be hot and trendy one moment, and then fall out of favor the next.
It’s a real challenge to evolve your business as the public’s needs change. When a company owns multiple brands in the apparel world, that gives it some protection as various labels may move in and out of popularity. But it also comes with increased risk.
Related: Retail brand with 29,000 locations files Chapter 11 bankruptcy
Consumer tastes changed during the Covid-19 pandemic because people who worked in offices stopped having to go in. In an earnings call, Doug McMillon, CEO of Walmart (WMT) , even noted that his company was selling more tops and fewer bottoms.
That’s because for a Zoom or other video meeting, people only cared about what they looked like from the legs up because their bottom half does not appear on camera. That’s not the only change caused by the pandemic as that dark period led to a period where many Americans prized comfort over dressing up.
And, with many offices not reopening, or only requiring workers to come in part of the time, overall demand has shifted. On top of that, supply chains have gotten more challenging, and material and labor costs have increased.
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That has proven to be a dangerous combination of problems for a clothing company that owns multiple well-known brands over more than 100 years of operation.
Clothing retailers have to stay in line with what customers want.
Image source: Getty Images
Delta Apparel has a long history
Delta Apparel (DLA) may not be a household name on its own, but it houses a number of somewhat known and well-known brands. These include Callaway, Perry Ellis, Soffe Apparel, Burnside, and Salt Life.
It operates as a wholesaler under the Delta Apparel name.
“For over 100 years, Delta Apparel has strived to bring people closer to what they love. We work hard every day to remain on the cutting edge of the marketplace by delivering the quality, selection, and innovation you and your customers want — at extremely competitive prices,” the company shared on its website. “…Delta Apparel is your one stop shop for apparel and accessory needs. Whether you’re looking for rugged workwear, corporate apparel, workout, and athletic gear, or simply your new favorite tee it’s all here — at Delta Apparel.”
The company went public in June 2000 and traded as high as $34 in 2021. The stock closed Friday at 58 cents. Its financial position has been declining since, and its second-quarter results included some troubling numbers:
Operating loss increased from $5.3 million in the prior year period to $24.4 million. Gross margins were 4.3% compared to 14.7% in the prior year period, driven primarily by production curtailments in the Delta Group segment.Net sales were $78.9 million, down 28.4% from the year earlier sales of $110.3 million.
It also shared a fairly bleak capital position.
“Cash on hand and availability under our U.S. revolving credit facility totaled $11.8 million as of March 30, 2024, an increase of $4.4 million from December 2023 and a decrease of $2.4 million from September 2023,” it shared.
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Delta Apparel files Chapter 11 bankruptcy
Delta Apparel filed Chapter 11 bankruptcy in U.S. Bankruptcy Court in Delaware. The filing was dated June 30. The company reported between 200 and 299 creditors and debts and assets each in the $100 million to $500 million range.
As of June 1, the company had $337.8 million in total assets and $244.5 million in liabilities, according to the bankruptcy filing. Delta Apparel’s largest creditor is Park Mills, to which it owes over $22 million.
The clothing company did not share a full bankruptcy plan, nor has it made any public comment on its ongoing operations.
“The main problem for Delta Apparel is the demand for many of its products have declined steeply,” GlobalData retail analyst Neil Saunders told Just Style. “The retailers it sells to via wholesale have cut back on inventory and orders as customers have reduced buying activity.
More bankruptcy:
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Delta Apparel has hired Focus Management Group and named Tim Pubian as its Chief Restructuring Officer (CRO).
The filing did share that its new CRO has board authorization to enter into a debtor-in-possession agreement with Wells Fargo Bank that allows him to pledge the company’s assets or allow liens to be placed on its property to secure that agreement, pending court approval
