North Carolina’s economy got some bad news Thursday.
Delta Apparel said it would close its textile manufacturing operation in the town of Maiden, eliminating 140 jobs in the process, and transition the facility’s production to Honduras as part of the company’s efforts to remain competitive and cut costs to the tune of $8 million annually.
“This realignment is intended to maximize production at the company’s lower-cost facility and eliminate duplicative fixed costs,” Delta said in a press release, noting that once the move is completed, gross margins will improve and earnings will increase by up to $0.70 per diluted share.
Additionally, the company said it expects to support its Mexico sew and screen-print production with in-country sourced fabric, while its Made in U.S.A. programs will use domestic fabric sourced with current suppliers and sewn in its Rowland, North Carolina, plant.
Delta also shared plans to invest around $7 million in new equipment for its offshore manufacturing operations, which it plans to install this quarter in order to expand output in those facilities.
Severance, shutdown and start-up inefficiency and other expenses are expected to cost the company in the region of $3 million, or $0.28 per diluted share, mainly in the third quarter.
Delta said the move should be completed by the end of the current financial year and that savings should materialize in the second half of 2017.
“Our manufacturing realignment and the expansion and modernization of our facilities should allow us to further increase efficiency, reduce fixed costs and ultimately better serve our customers through shorter lead times,” Robert Humphreys, chairman and chief executive officer, stated. “The decision to close the Maiden plant and eliminate the jobs of approximately 160 employees who have contributed significantly to our growth and success over the years was extremely difficult. However, we believe these steps are necessary to be cost-competitive with other global competitors.”
Delta’s brand portfolio includes its namesake as well as Soffe, Intensity Athletics, Salt Life and Junk Food.