Delta Apparel to Close DTG2Go

Delta Apparel Inc., a provider of activewear and lifestyle apparel products, officially notified the U.S. Securities and Exchange Commission (SEC) that it will be closing DTG2Go, the company’s direct-to-garment on-demand printing business.

According to the June 18 SEC filing, Delta Apparel’s board of directors approved the plan (dubbed the “DTG2Go Exit Plan”) to exit the DTG2Go business unit. As part of the exit plan, Delta ceased all production operations related to DTG2Go on June 13.

As stated in the filing, “The DTG2Go exit plan provides for a reduction of the company’s workforce by approximately 115 employees. In connection with the DTG2Go exit plan, the company expects to permanently close its DTG2Go facility in Storm Lake, Iowa in addition to printing facilities within certain distribution centers devoted to the Delta Group operating segment located in Cranbury, New Jersey; Fayetteville, North Carolina; Phoenix, Arizona; LaVergne, Tennessee; and Miami, Florida.”

According to Delta, it expects the exit plan to be completed within 120 days of the filing – which would place all closings effective by mid-October.

“The final costs and cash expenditures relating to the DTG2Go exit plan will not be known until all related activities have been completed,” stated Delta in the filing. “Such restructuring charges are expected to be incurred beginning in the third quarter of fiscal year 2024.”

In a quarterly report filed with the SEC on May 9, Delta disclosed that it has been “keenly focused on evaluating its business strategies and managing its working capital and costs in light of significant market, operational, and liquidity challenges.”

Challenges cited included:

• Delta’s receipt of notice in May 2024 that the largest customer on DTG2Go’s digital-first model no longer intended to source production from the platform
• Delta’s deteriorating liquidity position, including its limited cash and cash equivalents and its inability to raise additional capital or otherwise obtain necessary liquidity to have sufficient resources to fund its operations, which continued to prevent it from purchasing all of the yarn, dyes, chemicals and other production inputs required to supply its manufacturing facilities
• Significant reductions in demand across certain business units during fiscal year 2023 and the beginning of fiscal year 2024, which has impacted Delta’s operating results and financial position
• Delta’s continued non-compliance with certain covenants in its U.S. asset-based revolving credit facility, which constituted a breach of that agreement and an event of default that remained uncured at the time of the June 18 report

Delta ended the June 18 filing, stating, “The DTG2Go exit plan was approved after evaluating the ongoing market, operational, and liquidity challenges discussed above, including the expected impact of the loss of DTG2Go’s largest customer on forecasts of DTG2Go’s current and future years business performance. In addition, the company’s deteriorating liquidity position and lack of funding has continued to prevent it from purchasing raw materials necessary to operate its manufacturing facilities and to pay compensation and benefits due to employees.”

As previously disclosed in the May 9 SEC filing and also mentioned in the June 18 filing, Delta also continues to explore the potential sale of its Salt Life business.