What You Should Know Before Delta Apparel (DLA) Q1 Earnings

Delta Apparel, Inc. DLA is slated to report first-quarter fiscal 2018 results on Feb 5, after the closing bell.

The question lingering in investors’ minds is, whether this lifestyle basics and branded active wear apparel designer and marketer will be able to pull off a positive earnings surprise in the to-be reported quarter. The company has delivered a negative earnings surprise in three of the last four quarters, with an average miss of 79.8%

Let’s see how things are shaping up prior to the earnings announcement.

What to Expect?

The Zacks Consensus Estimate of a loss of 6 cents for the first quarter has been stable over the last 30 days. However, the estimate reflects an improvement of 25% from a loss of 8 cents reported in the prior-year quarter.

Moreover, analysts polled by Zacks expect revenues of $78 million for the impending quarter, down 8.6% from the year-ago quarter.

Factors Influencing the Quarter

Delta Apparel has been struggling with declines at brick-and-mortar stores for a while. Further, the company’s Branded segment has been witnessing lower sales for the last few quarters, primarily due to the sale of its Junkfood Clothing business. Additionally, general market softness, customer bankruptcies, several weather disruptions along with a challenging retail backdrop has been hurting the company’s performance and overall profitability.

As a result, the company’s shares have declined 12.1% in the past three months against the industry’s growth of 21.2%.

 

Nevertheless, management stated that it began fiscal 2018 on a solid note when it recently reported preliminary first-quarter fiscal 2018 results. The company projects overall net sales in the band of $88-$90 million, up 3-5% from the year-ago quarter. Excluding the revenues from the divestiture of Junkfood business, it depicts growth of 16-18%.

Notably, the quarter witnessed double-digit year-over-year sales increase and robust execution across each of its businesses despite it being the seasonally slowest quarter. The improvement was driven by enhanced distribution and improved product offerings as well as gain in market share. Also, the latest Salt Life and Soffe retail outlets opened in the quarter aided results via brand-building and consumer awareness opportunities. Markedly, the solid sales results keeps management encouraged about delivering pre-tax profit in the first quarter, as against a loss reported in the same period last year.

So, let’s wait and see whether these strategic endeavors are reflected in the upcoming results and provide cushion to the stock.

What Does the Zacks Model Unveil?

Our proven model does not show that Delta Apparel is likely to beat earnings estimates in the first quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.

Delta Apparel has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 6 cents. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

G-III Apparel Group, Ltd. GIII has an Earnings ESP of +14.29% and a Zacks Rank of 2.

PVH Corp. PVH has an Earnings ESP of +1.96% and a Zacks Rank #3.

The Home Depot, Inc. HD has an Earnings ESP of +0.29% and a Zacks Rank #3.

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