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Delta Apparel Liquidity Challenges Spur Factory Suspensions, Bankruptcy Considerations

25 Jun 2024 12:33 PM | Cassondra Franze (Administrator)

Delta Apparel (PPAI 188431, Gold) – the No. 69 supplier in the 2024 PPAI 100 – is suspending its manufacturing operations in Honduras due to ongoing liquidity challenges.

“The company’s deteriorating liquidity position and lack of funding has continued to prevent it from purchasing raw materials necessary to operate its offshore manufacturing facilities and to pay compensation and benefits due to offshore employees,” Delta Apparel said in the SEC filing.

The suspension, which is expected to remain in effect for at least 120 days, follows the wind-down of the Duluth, Georgia-based company’s manufacturing operations in Mexico earlier this year.

  • Meanwhile, the firm is still trying to sell its manufacturing operations in El Salvador.
  • The SEC filing also mentioned that the company is no longer emphasizing Delta Activewear’s Global Brands channel.


Delta Apparel says it’s exploring strategic initiatives involving its offshore manufacturing operations, “which may include a sale or a permanent wind-down of all such operations,” and expects to finalize its plan within 120 days.

Financial Struggles  

In May, the apparel maker reported that its net sales for the fiscal second quarter were $78.9 million, down nearly 40% from the same period last year.

  • Net sales from its retail stores segment – Salt Life Group – were $15.5 million in Q2, down about 22% from Q2 2023.
  • In the 2023 fiscal year, which ended September 30, 2023, Delta Apparel reported a loss of $33.2 million.


“Fiscal 2023 was undoubtedly a challenging year for our company and the industry given the reduced demand environment following last year’s post-pandemic seller’s market,” said Robert W. Humphreys, who resigned as CEO and chairman of Delta Apparel at the request of the board of directors just two weeks after the fiscal Q2 report.

  • Following Humphreys’ departure, the president of Delta Group, Delta Apparel’s executive vice president and chief administrative officer, as well as two board members, all submitted their resignations.


In the same SEC filing, Delta Apparel reported that Elkay Partners had exercised a discretionary right and terminated its planned $23.5 million purchase of Delta Apparel’s 35-acre campus in Fayetteville, North Carolina.

Possible Bankruptcy

Delta Apparel also disclosed that it has been non-compliant with a financial covenant contained in its U.S. revolving credit facility that required its financial results to “improve at a rate faster than we experienced during the second quarter and at a faster rate than we expect to experience over the next 12 months.”

  • According to the company, its lenders have elected not to declare the principal and all other amounts owed to be immediately due and payable.


However, if the lenders do call such debt during the next 12 months, Delta Apparel says it won’t have readily available funds to repay the debt, raising “substantial doubt about the company’s ability to continue as a going concern.” If the firm can’t address such concerns, it mayseek relief under applicable bankruptcy laws, according to the quarterly report.

  • Additionally, the company says it was notified by certain suppliers in January that they would no longer extend credit in amounts or terms to the extent previously allowed, limiting Delta Apparel’s ability to obtain raw materials.

Furthermore, its DTG2Go digital-print business recently received notice that its largest customer no longer intends to source production from the platform. As a result, the company expects to receive an impairment charge in the third quarter of fiscal 2024.

Written by: John Corrigan

Published with Permission from PPAI

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