Dive Temporary:
- Delta Attire Inc., dad or mum firm of the Salt Life lively attire model, was offered by a court docket sanctioned chapter public sale to model administration entity Iconix Worldwide and Hilco for $38.74 million on Sept. 16. The acquisition contains the Salt Life model and its associated belongings.
- Salt Life’s 28 retail shops in 10 states started liquidation gross sales on Friday, Hilco mentioned in a Tuesday announcement. Hilco can also be overseeing the sale of distribution heart stock and retailer fixtures and gear. Iconix plans to pivot Salt Life to concentrate on e-commerce and wholesale.
- Delta Attire filed for Chapter 11 on June 30 in chapter court docket in Delaware. Courtroom paperwork point out the corporate reported $337.8 million in belongings and $244.5 in money owed. Courtroom paperwork additionally present the corporate’s prime 5 collectors have been collectively owed over $29 million.
Dive Perception:
The Salt Life model started in 2003. In response to a firm historical past, two surfers in Jacksonville, Florida, bought the phrases as a tattoo following “a shared second of appreciation for what they referred to as ‘the salt life.’” The design was recreated as a decal and placed on T-shirts and hats.
It expanded into efficiency attire, swimwear, sun shades, baggage, and equipment. The model was organized round wholesale, e-commerce and firm owned and operated retail shops. Salt Life additionally branched out into eating places and beer.
However over the previous two years, dad or mum Delta skilled monetary difficulties that led the corporate to reduce its operations. These points embrace declining liquidity and demand, Chief Restructuring Officer J. Tim Pruban mentioned in court docket paperwork.
Cotton costs surged in 2022, leading to elevated prices. In response, the corporate determined to scale back manufacturing and supply decrease price cotton. Whereas that transfer did scale back prices, it additionally generated a one-time prevalence of bills, together with about $15 million in severance obligations, Pruban mentioned. The corporate hoped to soak up these prices in 2023 however couldn’t on account of diminished demand.
Final yr, Delta initiated a value financial savings plan that centered on lowering the corporate’s offshore manufacturing footprint from three nations to 2 and from six amenities to 4. As a part of that shift, the corporate moved its Mexico-based stitching and display screen printing enterprise to different nations in Central America, former Delta CEO Robert Humphreys mentioned throughout a primary quarter earnings name.
The corporate additionally initiated a sale-leaseback of a Tennessee distribution heart, producing about $5.4 million in proceeds. Regardless of the success of the restructuring initiatives, “we have been upset in our general outcomes for the primary fiscal quarter of 2024, which as a reminder, is often our slowest general quarter because of the seasonality of our varied companies,” Humphreys mentioned in the course of the February earnings name. Humphreys resigned as CEO and board chair on June 29, simply earlier than the corporate’s Chapter 11 submitting.
Delta’s internet gross sales have been $78.9 million within the second quarter of fiscal yr 2024 in comparison with $110.3 million in 2023. Moreover, the corporate’s Q2 gross margin fell to 4.3% in Q2, down from 14.7% within the prior yr. Pruban mentioned a good portion of that discount was brought on by unabsorbed manufacturing curtailment prices. The corporate reported a $33.2 million internet loss for its 2023 fiscal yr, which ended final September. The corporate employed slightly below 600 individuals earlier than chapter.
Because of diminished liquidity, Delta defaulted on its pre-bankruptcy mortgage phrases. Its lenders, in flip, decreased the funding they prolonged to Delta. On the time of its Chapter 11 submitting, Bruban mentioned the corporate had over $80 million excellent on a credit score settlement, however simply over $2 million in money readily available.