An unexpected company in Georgia now files bankruptcy, leading to worries of upcoming layoffs at its North Carolina operations.
Delta Apparel, based in Duluth, Georgia, filed for Chapter 11 bankruptcy protection in Delaware on June 30 and is seeking a new owner.
“If the company is unable to conclude a suitable transaction, the planned closing will be permanent,” according to a notice filed with the Department of Commerce.
“We’re still hopeful the layoff doesn’t have to happen,” says a company spokesperson who requested their name not be used.
Delta Apparel will know more within 30 to 60 days, the spokesperson added.
“The Company was not able to provide earlier notice as it was actively seeking a transaction to enable the continuation of operations, and believed in good faith that the potential for business disruption accompanying notice would have impaired its ability to obtain such a transaction,” the notice stated.
The company filed paperwork with North Carolina that same day announcing it could permanently close operations in Cabarrus, Cumberland and Robeson counties.
Job losses total 22 (administrative jobs) in Cabarrus County, a manufacturing and distribution site in Cumberland County totaling 156 jobs and 46 jobs in Robeson County at a manufacturing site in Rowland, per Business NC.
The effective date for layoffs at all four sites is Aug. 29, according to paperwork filed with the N.C. Department of Commerce.
All employees were notified they may no longer have jobs after Aug. 29.
Delta Apparel listed roughly $337.8 million in assets and $244.5 million in total debt, according to the company’s bankruptcy petition, as reported by Bloomberg.
An increase in cotton prices and other raw materials as well as diminished demand for its products contributed to its financial troubles, according to court papers.
Shares closed at 20 cents, down 55%.
Delta Apparel has traded between 2 cents and 45 cents in the past year.
It traded for more than $30 in 2021.
The company reported $415.3 million in sales last year, compared with $484.9 million the year before.
Similar notices were filed in the states of South Carolina, Florida, Texas, Arizona and Georgia.
The company has about 600 employees in the U.S., with several thousand more working in Mexico and Honduras.
Four Florida surfing buddies launched the Salt Life line of beachy T-shirts and board shorts in 2003.
The company was acquired by Delta Apparel in 2013 and for a period shared space with M.J. Soffe, a Fayetteville-grown purveyor of casual and athletic wear that Delta acquired in 2003.
The N.C. company was founded in 1946 by the late M.J. Soffe, an Army vet.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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