Delta Apparel’s (asi/49172) sales are down 12% through the first nine months of its fiscal year and the Top 40 supplier has sustained a nearly $17 million loss during the period, which ended July 1, according to a financial report the publicly traded company released Aug. 3.

Executives said the loss and sales decline are, in part, due to a drop in demand that’s occurred following a heavy inventory stock-up by retailers and other carriers of the firm’s apparel in the prior fiscal year. That inventory ramp-up by customers happened after stock levels dropped during the supply chain-challenged days of the COVID-19 pandemic. Top 40 supplier Gildan (asi/56842) reported a similar phenomenon recently.

Higher costs for cotton also weighed on the bottom line, according to Delta Apparel, which decided late in 2022 to curtail some manufacturing output amid the lessened demand. That decision “greatly impacted our operating results this quarter and year-to-date,” said CEO Robert W. Humphreys.

For the nine months concluded July 1, Delta Apparel said total company sales were $323.9 million, down from $369.3 million the prior year. The revenue figure includes the company’s sales across all business channels, such as to retailers, and not just the promotional products industry. In the firm’s Delta Group segment, which includes but isn’t limited to sales to the promo space, sales dropped 14% to $277.5 million.

Over the nine-month stretch, a net loss of $16.8 million translated to a loss of -$2.41 per diluted share for investors. Operating income declined year over year from $29.5 million, or 8% of sales, to an operating loss of $12.4 million, or -3.8% of sales.

Third-quarter performance sounded the same generally dour note as the year overall. Total company sales declined by over $20 million to $106.3 million. Delta Group segment revenue was down 16% year over year to $89.1 million.

For Q3, Delta Apparel registered a net loss of $6.3 million, or -$0.90 per diluted share. The firm experienced an operating loss of $4.5 million.

Humphreys noted that Delta Apparel is seeing “some signs of demand improvement,” including in the “channel serving mass and mid-tier retailers.” He said the firm’s print-on-demand business, DTG2Go, has launched a “proprietary customer order portal that we believe will catalyze more industry migration to digital and increase our market share.”

Delta Apparel’s fiscal 2024 year will begin in October. For that year, Delta Apparel is expecting total company sales of $410 to $425 million.

“Looking ahead, we expect steady improvement in our operating results as we close out our fourth quarter and move into our next fiscal year,” Humphreys said. He anticipates “sequentially improving gross margins and operating profit as well as topline growth in the back half of the (2024 fiscal) year.”

In its fiscal 2022 year, in which Delta Apparel benefited from the later pandemic-era inventory ramp-up by customers, total company sales were approximately $485 million.

Based on estimated North American promotional product revenue of $49.6 million, Delta Apparel ranked 37^th on Counselor’s most recent list of the largest suppliers in the industry.