Buyer For Salt Life Approaches Delta Apparel
The company said details on the unsolicited offer will not be disclosed unless its board accepts a deal or has completed a full review of its options. Baird is serving as financial advisor to Delta Apparel.
“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,” Delta Chair and CEO Bob Humphreys said in a statement.
Delta Apparel bought Salt Life in 2013 for $15 million in cash, along with two promissory notes for $22 million and an additional payment if performance targets were met. Salt Life, at the time of the acquisition, had $20 million in sales and a business mostly reliant on wholesale.
Delta has since grown the brand to revenue in excess of $60 million, with distribution in more than 1,700 wholesale stores, 25 Salt Life stores, and a fast-growing e-commerce business.
Salt Life, which was started by four Florida watermen in 2003, expanded its store fleet to New York for the first time earlier this year. The company also counts stores in California, Texas, Alabama, Georgia, Florida, South Carolina, Delaware, and New Jersey. The locations are a mix of full-price and outlet stores.
Same-store sales during the fiscal third quarter ended July 1 fell 3.5% due to a drop in travel to the tourist areas where Salt Life stores are located along with poor weather.
In the e-commerce channel, Salt Life sales jumped 100% in the July quarter compared to the prior year.
The Salt Life business also includes licensing deals, including one announced earlier this year with Magnussen Home that will push the brand into the home category for Spring 2024.
Even with the potential to further grow the licensing business, management has been cautious about how far it expands the brand, with a focus on ensuring that licensees are taking Salt Life to categories that make sense to consumers.
“We get a lot of inquiries about partnering with us and people want to leverage the Salt Life brand,” Humphreys told analysts in August. “We’re extremely careful in that arena. A, it needs to move the needle for us and, B, we need to understand what the distribution will be. And, probably most importantly, we need to think about how our consumers will resonate with that product or not. So, our mantra there is, ‘Do no harm.’”
The Salt Life business generated sales of $17.2 million during the July quarter. That was down from net sales of $20.9 million in the year-ago period. Operating income for Salt Life during the same period totaled $1.6 million, compared to $3.5 million a year ago.
The business was challenged in the quarter as a result of the broader inventory overhang at retail, in addition to delivery timing in the year-ago comparison that helped boost sales then.
Delta shares surged 21% in after-hours trading Monday after the purchase offer was announced. The company had a recent market cap of $46.2 million.
Kari Hamanaka can be reached at email@example.com.