Delta Apparel, Inc.
Q4 2019 Earnings Call Transcript

Published: 22 Nov 2019

[Operator:]

Thank you. And good afternoon to everyone participating in Delta Apparel’s Fiscal 2019 Fourth Quarter and Full Year Earnings Conference Call. Joining us from management are Bob Humphreys, Chairman and Chief Executive Officer; and Deb Merrill, Chief Financial Officer and President, Delta Group.Before we begin, I would like to remind everyone that during the course of this conference call, projections or other forward-looking statements may be made by Delta Apparel’s executives. Such projections and statements suggest prediction and involve risks and uncertainty, and actual results may differ materially.Please refer to the periodic reports filed with the Securities and Exchange Commission, including the company’s most recent Form 10-K. These documents identify important factors that could cause actual results to differ materially from those contained in the projections or forward-looking statements.Please note that any forward-looking statements are made only as of today and except as required by law, the company does not commit to update or revise any forward-looking statements, even if it becomes apparent that any projected results will not be realized.I will now turn the call over to Delta’s Chairman and Chief Executive Officer, Bob Humphreys.

[Bob Humphreys:]

Good afternoon. And thank you for your interest in Delta Apparel. On today’s call I will briefly discuss our business results along with some key highlights that showcase while we continue to believe that Delta Apparel is positioned well for profitable future growth. I will then turn the call over to our CFO, Deb Merrill for a more detailed discussion of our financial results.We ended our fiscal year on a very high note with a fantastic fourth quarter including year-over-year sales growth of 16% and a 40% improvement in operating profit. Our fourth quarter success was broad-based, with our Delta Group segment achieving strong double-digit sales growth of 17% and sales in our Salt Life Group segment growing 13%. The accelerated topline performance coupled with solid execution at the operating level drove earnings for the fourth quarter of $0.50 per diluted share, which is up from $0.43 per diluted share in last year’s fourth quarter.Strong performance of our Delta Group during the quarter was led our digital, printing, fulfillment business, DTG2Go would sell robust sales growth of 40% -- 54%. The Delta Group also benefited from double-digit sales increases in our Activewear business and the second consecutive quarter of sales growth in our Soffe brand.The success in our Salt Life Group segment was led by double-digit sales growth of the Salt Life brand driven from expansion across a number of distribution channels. The continued success we are seeing at Salt Life only deepens our confidence in the brands growth prospects and positive consumer sentiment.Taking a closer look at DTG2Go business in our Delta Group segment, for those of you who may not know the history of the business, it has steadily grown over the 10 years we have operated the business and in the past two years has expanded rapidly both through organic growth, as well as several acquisition.Our investments in new locations across the country, state-of-the-art, digital print equipment and proprietary technology systems had made DTG2Go the clear industry leader in the digital print space. We remain very excited about the growth potential of this business, both on a standalone basis and at a flexible platform to generate opportunities in other areas of our Delta Group segment.DTG2Go continues to move closely to integrate with our Activewear business through integrated distribution and fulfillment facility, as well as multifaceted customer offerings, including Activewear products and quick turn digital decoration capabilities.DTG2Go is the only digital print supplier in the world offering the fulfillment solution integrated with a vertical manufacturing platform like Activewear that offers a reliable supply of fashion and core basic garments, including T-shirts, shorts and other net garment. DTG2Go also partners with our Soffe business to offer customers a hybrid decoration model combining DTG2Go’s digital expertise with Soffe’s screen print platform.As I mentioned on our last call, we continue to expand our leadership position in digital printing this past year with the addition of two new facilities that now give us the ability to reach over half of all U.S. consumers with one-day shipping, including the key New York City and Dallas Metropolitan area markets. These facilities are up and running, and will be key contributors during our important holiday selling season.DTG2Go now operates a truly seamless nationwide print and fulfillment network consisting of seven digital print locations across the United States and we believe we are uniquely positioned as the go-to on-demand direct-to-garment apparel printing solution for customers seeking a flexible multi-location partner that can consistently deliver high quality products on time.We continue to view digital printing as a large and generally untapped market with still only a very small percentage of all decorated garments sell domestically and globally being digitally printed. The key selling point for DTG2Go’s on-demand model is that it can greatly reduce or even eliminate inventory risk for our customers. It also allows them to better deploy their intellectual property portfolios in creative design teams by being able to offer a wider range of products without committing to traditional supplier minimum order quantities or incurring the typical level of working capital investment required to expand the product line.DTG2Go new business pipeline remains healthy for both near-term and long-term perspective, and we continue to see tremendous expansion opportunities within our existing customer base and a new channels such as traditional screen printers, promotional product providers, retail licensing, brick-and-mortar retailers, large brands and more.DTG2Go also continues to enhances its customer offerings with value-added services such as unique UPC codes and other packaging offerings that facilitate a seamless experience with on-demand and in-store purchases that retail customers want.Our first-to-market adoption of a new polyester printing technology is going well. We see a tremendous opportunity to use this new technology to capitalize on the high growth potential for personalized decorated polyester garment, which should benefit not only DTG2Go but also the uniform business operated within our Soffe Intensity brand.The frame of the financial performance of our DTG2Go business, we ended fiscal 2019 with revenue of roughly $60 million, achieving our goal of more than doubling the business, with a strong momentum we have entered into the new fiscal year coupled with our expanded facility footprint, increase capacity and value adding service offerings, we see a clear path to reach our goals of 20% compounded sales growth and a healthy double-digit operating margin.Turning to other parts of the Delta Group segment. In our Activewear business we also concluded the year on a high note with a double-digit increase in both sales and unit sales for the fourth quarter. The strong final push at Activewear propelled at the sales growth for the year, despite the expected early midyear headwinds from production shifts with two significant customers.Momentum in retail licensing and regional screenprint channels continue during the quarter and our inventory strategies allowed us to stay in good thing with demand and to be opportunistic in the market.We saw another quarter of strong double-digit growth on our B2B side and our catalog fashion basic products grew by double digits once again. The rapid expansion of our fashion basics line particularly Delta Platinum continues and we expect it to further grow across multiple sales channels.The vast majority of our new product development continues to be focused on fashion basics adding product diversification and expanding colors and silhouette. We also continue to see more cross-selling opportunities leveraging catalog blanks in DTG2Go digital print and fulfillment services.FunTees achieved another quarter of record unit ship resulting in full year growth of nearly 12% in unit shipped. As we have previously highlighted, we onboarded several new customers late in fiscal 2018 that broaden customer base with new brands and into sales channels. This diversification impacted our fiscal 2019 first half results due to new programs start-up cost involving shifts to more youth and infant garments and changes in garment fabrication, all of which lowered our average selling price.We are pleased to be able to say that we are back on top of the growth line in this business achieving double-digit sales growth during the fourth quarter. We expect this growth to continue in fiscal 2020 with brands and retailers who are interested in our full service supply chain management and technology along with our manufacturing platform, which is compliant, flexible in the products we produce and the retail ready services we provide, and importantly, close to the United States market with nationwide distribution coverage.We remain focused on building internal manufacturing capacity at Activewear to satisfy demand and better service customers with speed of delivery. To that end, we are investing in a significant expansion of our Western Hemisphere sewing capacity and a well underway with our production build.This increase capacity is within our existing facilities allowing us to further leverage our fixed overhead costs, thereby lowering our incremental product cost. Overall, we feel very good about our Activewear business heading into the new fiscal year and are targeting low single-digit growth in sales.Finally, within our Delta Group segment an update on our Soffe brand. We are very pleased to report our second consecutive quarter of year-over-year sales growth at Soffe, as well as another quarter of solid bottomline improvement.Soffe success during the quarter was broad-based with strength in the military channel, as well as the specialty and the e-retailer channel. The team has continued to refine the core Soffe product line and strategically develop new lines such as channel specific graphic tee program.The Soffe team also continues to do a good job of increasing operating efficiencies through cost controls and inventory discipline. Soffe’s integration with other parts of our Delta Group segment including our Activewear sales platform and DTG2Go digital printing has created a nice growth path for Soffe.Now for an update on our Salt Life Group segment, which as I mentioned, also entered the fiscal year on a high note with fourth quarter sales growth of 13% at healthy margins, including growth in both sales units and average selling price.The strong performance in our Salt Life business was spread across generally all sales channels and we were particularly pleased to see acceleration of our B2C e-commerce site with sales growth of over 20% following the successful transition to a new site platform during our third fiscal quarter.Salt Life enjoyed strong growth across its national and regional customer footprint throughout the year and enters the new fiscal year with solid momentum and new opportunities on the horizon that we believe should lead to further geographic growth for the brand.Salt Life has been successful in its geographic expansion strategy through retail partners spanning the West Coast, the North Central area of the country and Midwest regions, and we expect that expansion to continue for the foreseeable future. New product line and categories also remain an important part of the growth for Salt Life within both our wholesale partner based, as well as our direct-to-consumer channel.The higher price performance line continues to be well received and the expansion of additional product lines such as accessories, outerwear and ladies swimwear are facilitating more opportunities to add incremental floor space including valuable point-of-sale displays and shop-in-shops.The growth of our branded Salt Life retail store footprint continues as planned with a recently opened store in Orlando, Florida and a Key West store which opened this past weekend. We are targeting a total of four new stores in fiscal 2020, which would bring our total of 11 Salt Life branded stores that we operate.As I mentioned, our saltlife.com e-commerce site experienced a strong sales rebound in the fourth quarter, with sales increase of over 20% on strengthening side traffic and conversions along with increasing mobile usage. We are very excited about our Salt Life site going into the holiday selling season and believe the improve speed, navigation, check out and other new features will drive continues strong performance.The Salt Life team also continues to do a good job of expanding the lifestyle DNA of the brand through innovative products such as Salt Life Larger, the branded beer currently has distribution in five states with plans to enter additional markets in the new fiscal year grab a more consumer awareness of the brand.Overall, our businesses are working together better than ever to capitalize on the opportunities to leverage the assets in our company and we are -- we believe we are in good shape and position to compete in our markets going forward.I will now turn the discussion over to Deb to review our financial results in more detail.

[Deb Merrill:]

Thank you, Bob. As Bob noted, we ended the year with strong result from both our Delta Group and Salt Life Group segment. As we expected our strong second half performance offset the first half that was pressured by a number of factors which are now behind us.For the fourth quarter, net sales were $108 million, 16.2% from the $92.9 million in last year’s fourth quarter. Net sales in the Delta Group segment increased 16.6% over the prior year period driven by gains in all the businesses. In the Salt Life Group segment net sales increased 12.5%.Gross profit was $22.9 million, up 19.5% from the prior year quarter. Gross margins increased 60 basis points to 21.2%, driven primarily by year-over-year improvement in both the Delta Group and Salt Life Group segment.Gross margin expansion in our Activewear and Soffe businesses offset a margin decline in our DTG2Go business, resulting from the additional costs associated with opening of our two new facility in Dallas, Texas and Cranberry, New Jersey.SG&A expenses as a percentage of overall sales was 17.1%, an improvement of 150 basis points versus last year driven by leverage from our strong sales performance during the quarter.Operating income was $4.8 million, compared to $3.5 million last year, a 40% improvement. This increase was driven principally from the improvements in the Delta Group segment.Net income for the quarter was $3.5 million or $0.50 per diluted share, compared to $3.1 million or 43% per diluted share in the prior year period.Now turning to our full year performance, net sales were $431.7 million, up 9.2% from $395.5 million in fiscal year 2018. Net sales in the Delta Group segment increased 9.3% over the prior year and net sales in the Salt Life Group segment increased 8.1% over the prior year.Gross profit was $85.2 million, up 3.8% from the $82 million last year. Gross margins improved sequentially each quarter during fiscal 2019 and for the year were 19.7%, compared to 20.7% in the prior year.SG&A expenses as a percentage of sales improved 60 basis points to 16.3%, compared to 16.9% in the prior year.Operating income was $15.9 million, compared to 17.4 million last year. Operating income decreased by $4.6 million in the first half of the fiscal year, primarily due to acquisition integration expense, costs associated with product changes in the FunTees business and investments in new and expanded distribution facility.In addition in the first half, we took a discrete expense of $2.5 million in connection with the resolution of litigation stemming from a 2016 customer bankruptcy. With these things behind us, we were able to achieve operating income expansion of $3.1 million in the second half of the year. The improved operating margin was principally from increased sales volume and improved selling price and product mix, along with a discrete net gain of $1 million from the settlement of the commercial litigation matter.Net income was $8.2 million or $1.17 per diluted share, compared to net income of $1.3 million or $0.18 last year. Excluding the $0.31 per diluted share impact of the customer bankruptcy matter, as well as the $0.10 per diluted share benefit from the favorable litigation settlement net income was $1.38 per diluted share in fiscal 2019.Now turning to the balance sheet. With regards to CapEx our spending for fiscal 2019 was $16.2 million with $5.9 million coming in the fourth quarter. The spend was principally related to distribution initiatives and facility upgrades, retail and direct-to-consumer initiatives, additional printing and other manufacturing equipment and IT system enhancement.Depreciation and amortization including noncash comp for fiscal 2019 was approximately $13.6 million, was approximately $3.3 million in the fourth quarter.Regarding our share purchase activity, for the year we repurchased 141,501 shares of our common stock at an average price of $19.33 per share and a total cost of about $2.7 million. We did not have any share repurchase activity in our fourth quarter. As of year-end, we had approximately $9.5 million authorized for share repurchases under our program.Total inventory at the end of fiscal 2019 was $179.1 million, compared with $175 million a year ago, with slightly higher units to support the business growth and higher cost per unit principally driven by product mix with more performance, fashion basics and fleece products and inventory.Total debt including capital lease financing, as of the end of fiscal 2019 was $135.1 million, up about $23 million from the end of fiscal 2018, due principally to the company’s digital print acquisition, and new facilities along with our distribution expansions and investments in our direct to consumer initiative.To summarize, we ended this fiscal year in strong fashion with success across our entire business in the fourth quarter. We achieved double-digit sales growth in both of our business segments for the fourth quarter and finished with high single-digit growth for the year.Our fast growing digital print business once again outperformed and we look for that trend to continue as we add new integrated facilities and further increase our capabilities and fulfillment capacity. We are happy with the momentum in our Salt Life business and we remain encouraged by the positive turn we are seeing in our Soffe business.Delta Apparel now has multiple areas for growth across its platform. And as you read in our recent press release, we are extremely excited to be adding another leg into our growth story with the launch of a full service vertical distributor offering in our Activewear business in 2020.This new model will allow us to reach a significant new customer channel with our own product, as well as a broad offering of nationally recognized branded product comprised of polo’s, outerwear, headwear, bags and other accessories.We are excited to be the exclusive distributor of the popular Penguin, Callaway and Jack Nicklaus lines of polo’s and outerwear. Other brands will include DRI DUCK, Burnside, Sierra, Outdoor Cap and Liberty Bags.Enhancing our Delta product line with these other branded category allows us to be a full service provider for the fast growing ad specialty and promotional market, as well as better service the screen print and retail channels that we believe can drive notable long-term growth for us.In addition, our DTG2Go digital print platform should provide us with a unique competitive advantage in the full service distributor space that further enhances our opportunity to gain market share. We believe this new initiative can be a real game changer for our company and our shareholders as it grows over time.Before turning the call back to Bob, I wanted to give some insight into our anticipated results for fiscal 2020. Looking at the first quarter, I am sure everyone is well aware that the holiday shopping season is the shortest possible this year, six days shorter than last year and there is a lot of commentary about what the impact of this may be on December results.Overall, we feel good about the quarter, but also recognize the impact that this nearly 20% shorter holiday season may have on the DTG2Go business, which operates at full capacity 24/7 from Thanksgiving to Christmas. With the additional capacity we have in place this year, we believe we will still see solid growth at DTG2Go, but this growth is expected to be somewhat hindered by the shorter holiday season.Looking at our overall DLA performance, we would expect to see sales growth in the mid-single digits at the December quarter, with gross margin and operating profit expansion from the prior year December quarter.For the full year, we continue to expect DTG2Go to grow its topline by 20% with double-digit operating margins. Our Salt Life business through its expanded geography and product extensions, coupled with our direct-to-consumer initiative should see full year double-digit sales growth with continue double-digit operating margins.Our remaining business unit should collectively contribute mid single-digit growth with improving profitability. We expect gross margin improvement in each of our quarters, which coupled with the solid sales growth should result in strong profitability improvement throughout the fiscal year.To support the anticipated growth in our business, we have decided to further expand the distribution facility we own in Clinton, Tennessee, which is strategically located to reach a broad geographic area. During this quarter, we are breaking ground to nearly double the size of this facility with the expansion allowing us to service our expanded product line within the facility.In addition, we will be adding retail packaging operations to service our growing direct-to-retail business and plan to integrate DTG2Go digital print and fulfillment services as well. The project is expected to take about a year to complete and the building expansion is expected to cost approximately $15 million.With this distribution expansion, we expect our capital expenditures in fiscal 2020 to be approximately $25 million to $28 million. We will continue to invest in expanding our capacity in digital print and our direct-to-consumer initiatives within Salt Life, as well as in our manufacturing operations and our business systems.To support our anticipated growth and secure our financing for the future on Tuesday, we amended our U.S. credit facility. The amendment increased our credit facility from $145 million to $170 million, extended our term for another five years and lowered our interest rates by 25 basis points, among other things. We are pleased to have the continued support of Wells Fargo, Regions Bank and PNC Bank as we continue the growth of Delta Apparel.I will now turn the call back to Bob for his final comments.

[Bob Humphreys:]

Thanks, Deb. Delta Apparel remains uniquely positioned to compete and thrive in today’s evolving retail environment, and we will continue to focus on serving our customers and investing in the multiple areas of our business, where we see long-term growth potential.The diversification of our customer base and expansion of our sales channels, including the exciting full service distributor market we are now poised to enter in 2020 remain key to our success and the growth we see ahead for our company.We are now offering the most comprehensive on-demand direct-to-garment apparel printing solutions in the world and we couple it with our vertical blank garment manufacturing platform, which gives us a tremendous opportunity to capitalize on what we continue to see as significant untapped demand.We also enter the new fiscal year with strong momentum with our Salt Life brand, which continues to benefit from incrementally broader consumer awareness and has what we believe a significant prospects for future growth. We look forward to seeing all of this and for an exciting fiscal year 2020.Before I close, I’d like to thank all of our teams for their hard work and dedication to Delta Apparel. We now have approximately 8,500 associates spread across four countries. And above all else, they drive our success and business results as a company.And now, Deb and I will be glad to answer any questions. So, Operator, you can open up the call for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Dave King of ROTH Capital Partners. Please go ahead.

[Unidentified Analyst:]

Hi. This is Gus [ph] stepping on for Dave. Thank you for taking our questions. So within the Delta Group, could you provide a bit more color on growth between catalog and private label within the quarter?

[Deb Merrill:]

We are pleased to announce that, as you all would remember FunTees had lower sales throughout the first three quarters, with the changes in our product line and customer base, and changes within that business.We are pleased to report that in our fourth quarter FunTees return to growth in that business. Our catalog business had growth throughout all of those quarters to end the year with growth overall for Activewear business.From the Soffe standpoint, we ended up with sales growth in our back half of the year, which was good, strong momentum to head into fiscal year 2020. And then, of course, we had a very strong growth across DTG2Go in each of the quarters.

[Unidentified Analyst:]

Thank you. That’s helpful. And I guess following up, what is driving growth within Salt Life within the quarter, was it doors with the new specialty businesses, accounts, the B2C channel, if you could give some color?

[Bob Humphreys:]

Yeah. It was really broad-based throughout the year at Salt life. Our independent customers grew nicely during the year. Our larger big box retailers continue to add doors and expanded their product offerings. Of course, we opened several new direct-to-consumer stores and had some nice growth on our e-commerce side too.So the good news was, it was broad-based, people buy more, people buying at a higher price point as well, so more units in entire average selling price, so we really felt good about the momentum, particularly ending the fiscal year at Salt Life.

[Unidentified Analyst:]

Thank you. And lastly, just thinking about gross margins, what weighed on DTG2Go in the quarter and when do you guys see that picking up? And how do you see the potential for sequential improvements in gross margin for overall?

[Deb Merrill:]

Yeah. So in our fourth quarter particularly we were opening our two new facilities, one in Dallas and one in Cranberry, and that certainly weighed on the gross margins in that business. Overall, as we continue to grow that topline and now have our facilities set, we would expect now to be able to leverage what we have and be improving those gross margins as that business grows.

[Operator:]

[Operator Instructions] Our next question comes from Dana Telsey of Telsey Advisory Group. Please go ahead.

[Dana Telsey:]

Good afternoon, everyone. And just to unpack the margins a little bit more, as you think about the gross margin rate and the SG&A rate, and by division. How are you planning for it for -- for this upcoming fiscal year? And lastly, when you think about the topline, what are you seeing in terms of pricing and demand from accounts, because it’s exciting about the new business that you are entering, how do you see that contributing topline as we move forward into this upcoming fiscal year? Thank you.

[Deb Merrill:]

All right. Hey. Hey Dana. Appreciate you being on the call. To kind of go through your questions a little bit on a gross margin basis, as we looked to 2020, we would expect to have gross margin improvement year-over-year in each of those quarters, and are looking at as a full year basis that hopefully each of our businesses will be able to see some gross margin improvement as they go through 2020.So that’s good news overall on our gross margins. Of course, then we would be leveraging some of those SG&A cost. We will be as we mentioned, putting some additional costs in our distribution facilities to support some of the new growth that we have or the growth initiatives we have in Activewear.So from that standpoint, those might be up a little bit, but overall, from a company standpoint, we would expect to see some further leverage on our SG&A as we go through on fiscal 2020 as well.I say from a pricing standpoint in some of these new initiatives what is exciting about the Activewear new initiatives. And we have continued, we really didn’t mention it on the call as detailed as we have in the past. But our fashion basic line continues to grow on very strong and has for the last several years.We continue to see that expanding and new products being added into our Delta Platinum line. Those carry higher margins than our core basics and in our new distributor model with the new brands that we are carrying. Those would be higher margins as well than our core basics line. So we think that that initiative will also -- will allow us to further expand our margins overall in our Activewear business.As Bob mentioned, across Salt Life, we are selling more performance types products. Those come at higher average selling prices and stronger margins than some of our other products. So that should allow us to expand there, as well as the nice strong direct-to-consumer growth that we are anticipating in that business for the year.So, overall, I think, that that bodes well for our topline, as well as leveraging and expanding gross margins and leveraging our cost structure throughout the year.

[Dana Telsey:]

Thank you.

[Operator:]

Our next question comes from Jamie Wilen of Wilen Management. Please go ahead.

[Jamie Wilen:]

Hi, fellows. On the DTG2Go business where is the growth coming from, are you getting individual accounts, are you getting retail stores using -- as your backside, are screen printers adding some additional volume or where is it all coming from?

[Deb Merrill:]

Sure. I would say, during the quarter we did add some new partners to the business. It’s interesting how things come up both in the existing channels we have and new people that are using software capabilities and other things like that to drive new business opportunities. We continue to grow with our retail partner that we had. We believe that that -- and are in some discussions that we believe that that retail growth should continue in 2020.And so, I think, as far as the screen printer model, that’s really going to come along with how we are going to use DTG2Go with our Activewear business and our distributor model to be offering an integrated one-stop buying through our Delta Activewear business, where now they can no longer just buy blank and then go have it decorated somewhere else.But they will actually be able to buy that decorated using and kind of powered by DTG2Go to buy a directly decorated garment from us. So we think that should really jumpstart the expansion to get screen printers to create new business in these small run high color count print.

[Jamie Wilen:]

And as you have grown the percentage adult to product, what was it last year or -- and what is it this year the percentage of DTG2Go business that are Delta products and what is your ultimate goal for what that business will be?

[Deb Merrill:]

Sure. And as you guys may recall, back before the acquisitions, we were running at about 25 plus percent as Delta garments. Certainly, when we then acquired the two acquisitions, who were not using the Delta products as much that lowered that down closer to about an 8%. Throughout this year, we have been able to increase that and launch new customers on to the Delta product.I would anticipate from the outlook that we should be back to north of 20% using the Delta garments as we go through fiscal 2020. And our goal is certainly to get back to that 30% number in the near future.

[Jamie Wilen:]

Okay. And you mentioned that with your new capabilities with the new machinery, you will be able to integrate more with Intensity and with Soffe. Could you talk about the opportunity there what’s the game plan?

[Deb Merrill:]

Sure. Yeah. So that’s with our polyester printing and with our Intensity brand to be able to support teams by decorating, whether that name and numbers on them or whatever their decorations are on uniforms and other polyester. So that is being launched as we speak and we think that will be a nice growth avenue on that Intensity brand.We are also using both our digital print, as well as some hybrid printing capabilities to do and expand that business again in smaller run or mid-size run high color count decorations, offering more graphic tee programs across the specialty channels. So we are excited about again, integrating Soffe in with decoration capabilities to service a broader market and open up some new channels.

[Jamie Wilen:]

Okay. And moving over to Salt Life one of the, I guess, the objectives of running the business is, it was always more toward the Coast, Southeast, Southwest. How have you been able to or how successful have you been able to take the brand and move it into kind of more Northern inland markets?

[Bob Humphreys:]

Well, we are all the way up the East Coast as far as you want to go really and so that’s going well. We have some really nice business in the Midwest in the outdoor retailer space. And we continue to be amazed that our e-commerce business really in the heartland of the U.S. So, and it seems like really in the last 12 months to 18 months, we have really seen acceleration in that part of the country.

[Jamie Wilen:]

What percentage of your business goes online on Salt Life?

[Bob Humphreys:]

Well, it depends on how you do the math like everything, but if you look at our overall business, it’s about 10% of it. But if you look at how that gets sold to the consumer, most of our wholesale business is sold basically at twice wholesale, you got to kind of set aside our retail, which is already marked up. So once you do all that, it’s in the 6% or 7% of overall sales to consumer -- on consumer dollar basis.

[Jamie Wilen:]

Okay. You said, online you grew 20% this quarter -- what is number?

[Bob Humphreys:]

I think I said the fought quarter. I think it was up 7% or 8% during the year, second quarter we turned off all of our marketing dollars in anticipation of changing to a new platform. Basically at the beginning of the third quarter, which we did kind of had flat sales in the third quarter as we implemented all that and had not all of it, but a lot of the new techniques and marketing capabilities and how are consumer gauged lap by the time we got to the fourth quarter. So, we continue to use more sophisticated marketing systems and techniques on that Salt Life side now.

[Jamie Wilen:]

Got it. Nice job fellows. Look like you have a lot of effort -- avenues for growth in the years ahead. Thanks.

[Bob Humphreys:]

Yeah. Thank you.

[Deb Merrill:]

Thank you.

[Operator:]

It appears there are no further questions at this time. I would like to turn the conference back to you for your final comment.

[Bob Humphreys:]

Okay. Well, thank you all for your interest in our company. Appreciate the questions. And we will look forward to talking to you in a few months about our first quarter. Thank you.

[Operator:]

This concludes today’s call. Thank you for your participation. You may now disconnect.