Delta Apparel (NYSE:DLA), Inc., a wholesale apparel company, has announced the suspension of its manufacturing operations in Honduras due to ongoing liquidity challenges. The decision, effective as of June 6, 2024, follows earlier operational wind-downs in Mexico and a strategic shift away from the Delta Activewear's Global Brands channel.
The suspension is expected to affect approximately 2,413 employees and will last for at least 120 days. During this period, Delta Apparel will explore strategic alternatives for its offshore manufacturing segment, which may include a sale or a complete shutdown of operations. The company anticipates finalizing and substantially completing its strategy within the 120-day time frame.
Delta Apparel anticipates incurring various restructuring charges, including those related to employee benefits, potential facility closure costs, and other associated expenditures. The precise financial impact is yet to be determined as the company is currently unable to estimate the exact costs. These charges are expected to begin affecting the company's financials starting in the third quarter of fiscal year 2024.
This development is part of a larger context of financial challenges faced by the company, as detailed in its quarterly report filed on May 9, 2024. These challenges include a deteriorating liquidity position, a failure to raise additional capital, reduced demand across business units, and non-compliance with certain loan covenants.
In addition to the suspension of operations in Honduras, Delta Apparel is also considering the sale of its Salt Life business and is evaluating other strategic options. The company's forward-looking statements regarding the suspension plan and its consequences are subject to risks and uncertainties, and actual results may differ materially from current projections.
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