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Financial Roundup: Basics Lead Delta Apparel, JD.com Revenues Rise, Zalando Earnings Flat

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Delta Apparel shed Junkfood and felt it, as e-commerce players JD.com and Zalando boost sales.

Delta Apparel

Sportswear manufacturer Delta Apparel Inc. reported net income increased 33 percent to $4.5 million, or 58 cents per diluted share, for its fiscal 2017 second quarter ended April 1, compared to $3.4 million, or 43 cents a share, in the year-ago period.

Delta noted that about 11 cents a share resulted from a gain on the sale of the company’s Junkfood business completed on March 31.

Net sales for the period fell 5 percent to $104.1 million, compared with $109.2 million in the prior-year period. The decline was primarily due to considerably lower sales at Junkfood during the quarter and the lingering impact of The Sports Authority bankruptcy on Soffe revenue.

While margins expanded in most of the company’s business units during the quarter, overall gross margins were 30 basis points lower year-over-year due to softness in the Junkfood business. On a sequential basis, however, gross margins expanded by 270 basis points.

Operating profit for the quarter was $7.5 million, or 7.2% of sales, versus $5.9 million, or 5.4%, in the prior year second quarter.

Basics segment revenue grew to $70.8 million from $69.8 million in the prior year quarter. Art Gun achieved record revenue for the quarter, an 11 percent increase over the comparable period, while Delta Activewear sales were up 1 percent, driven by private label programs. Fashion basics also contributed to the Activewear growth, with a 40 percent sales increase with significantly higher margins than basic T-shirts.

This year’s introduction of new fashion basics products continues to be well-received, particularly the new Delta Platinum line.

“We had a good quarter in a challenging retail environment and we believe those results are a preview of our anticipated second half performance,” Robert W. Humphreys, Delta Apparel, Inc.’s chairman and chief executive officer, said. “We expect Salt Life and Art Gun to achieve record revenue in 2017 and should see continued improvement in Activewear with its expanded product offerings. Our direct-to-consumer business should continue to improve profitability and expand its outreach. We anticipate a return to growth and improved profitability at Soffe driven by consumer demand for our branded products and strengths with our Made in America programs.”

JD.com

Online retailer JD.com Inc. saw net revenues increase 41.2% to $11 million in the first quarter ended March 31.

Net revenues excluding JD Finance increased 39.8% to $10.89 billion in the first quarter of 2017, up from $7.79 billion in the same period last year.

Income from operations for the first quarter was $122.5 million, compared to a loss of about $125 million at current exchange rate for the same period last year.

“The strong results across the board reflect that the Chinese market is embracing our model of a high-quality online shopping experience,” said Richard Liu, chairman and chief executive officer of JD.com. “China’s increasingly discerning consumers are migrating en masse to our unwavering vision of online retail that prioritizes quality and user experience above all else. Looking forward, we are focused on further enhancing our customer experience, while leveraging the capabilities of our platform to serve the needs of a broader business ecosystem.”

Zalando

European fashion e-tailer Zalando, which released its preliminary results last month, posted a 23.1% revenue increase to 980.2 million euros, or about $1.07 billion for the first quarter ended March 31.

Earnings before interest and taxes was flat from the prior-year quarter, at 67.09 million euros ($73.04 million). Zalando confirms its full-year guidance of revenue growth in a range of 20 percent to 25 percent, and an adjusted EBIT margin in the range of 5 percent to 6 percent.

Zalando surpassed 20 million active customers at the end of the first quarter 2017. The high customer base ordered more often, reflecting a more loyal shopping behavior, triggered also by an increasing use of mobile devices.

Rubin Ritter, co-CEO, said, “We are determined to win further market share and reach more customers across Europe. That is why we will continue investing in the consumer experience, our technology and logistics infrastructure, as well as our brand partner proposition.”

Zalando continued to push forward strategic investments into its infrastructure as well as customer and brand proposition. Examples include the ramp-up of new fulfillment centers and investments such as same day delivery and instant returns to enhance Zalando’s customer experience. The resulting increase in fulfillment costs and a small decrease in gross margin were mostly offset by more efficient marketing activities, benefitting from a strong brand awareness and loyal customer base.

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