Factors Likely To Weigh On Delta Apparel (DLA) In Q4 Earnings

Delta Apparel Inc. (NYSE:DLA) is set to report fourth-quarter and fiscal 2017 results on Nov 28, after the closing bell.

The company has been struggling with lower sales in branded segments due to divestitures and retail bankruptcies. Notably, Delta Apparel’s earnings missed the Zacks Consensus Estimate in the preceding quarter. The company has a mixed record of earnings surprises in the past four quarters.

With these aspects in mind, let’s delve into how things are shaping up for this designer and manufacturer of active and basic apparel products and other accessories.

What to Expect?

The Zacks Consensus Estimate for the fourth quarter and fiscal 2017 has been stable over the last 30 days at 30 cents per share and $1.25, respectively. Estimated earnings for the fourth quarter depict a 25% decline from the prior-year quarter. Also, the consensus mark for the fiscal depicts a year-on-year decline of 11.4%.

Further, analysts polled by Zacks expect revenues of $105.3 million in the said quarter, which reflects a 7.9% drop from the year-ago quarter. For fiscal 2017, the Zacks Consensus Estimate for revenues is pegged at $399 million, reflecting a decline of 6.2% year over year.

Delta Apparel, Inc. Price, Consensus and EPS Surprise

Delta Apparel, Inc. Price, Consensus and EPS Surprise | Delta Apparel, Inc. Quote

Factors Influencing the Quarter

Delta Apparel has been struggling with declines at brick-and-mortar stores for a while. This has led to divestures of underperforming units. As a result, the company’s revenue opportunities have considerably declined. In fact, we note that the sale of Junkfood Clothing Company (in April 2017) hurt Delta Apparel’s branded segment net sales in the second and third quarters of fiscal 2017.

Additionally, general market softness has led to loss of customers, delayed launches from new partners and retail bankruptcies. Additionally, big-box sporting goods retailers have been reporting lower sales volumes. These factors have been affecting performance at the Art Gun and Salt Life brands.

Nevertheless, growth in the company’s e-commerce business has been providing cushion to the declines in brick-and-mortar. Also, the company strives hard to recoup its branded segments through innovations and improvements in inventory management. The company has also been focusing on higher-margin products to boost profits. Although such efforts are encouraging, they are less likely to revive Delta Apparel’s fourth-quarter performance.

What does the Zacks Model Unveil?

Our proven model does not show that Delta Apparel is likely to beat estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Delta Apparel carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies which, according to our model, have the right combination of elements to deliver earnings beat.

Skechers USA Inc. (NYSE:SKX) has an Earnings ESP of +7.69% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ralph Lauren Corporation (NYSE:RL) has an Earnings ESP of +4.58% and a Zacks Rank #2.

Imax Corporation (NYSE:IMAX) has an Earnings ESP of +4.48% and a Zacks Rank #2.

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