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Activewear producer Tefron sales drop in Q3

19
Nov '07
Tefron Ltd presented its financial results for the third quarter of 2007.

Third Quarter 2007 Results:
Third quarter revenues were $30.3 million, representing a 22.2% decrease from third quarter 2006 revenues of $39.0 million. The decrease in revenues in the quarter was due to a reduction in sales of active-wear, primarily to Nike, and a reduction in sales of intimate apparel, mainly to Victoria's Secret for older Cut & Sew collections. This reduction was slightly offset by an increase in sales of swimwear, which are seasonally weak in the third quarter.

Third quarter gross margin was 7.8%, compared with a gross margin of 23.3% in the third quarter of 2006. Operating loss for the quarter was $1.5 million, while on a non-GAAP basis, excluding compensation related to modification of stock options, operating loss, was $1.2 million, as compared with an operating income of $5.3 million (13.7% of revenues) in the third quarter of 2006.

Net loss for the quarter was $1.7 million, or $0.08 per diluted share, while on a non-GAAP basis, excluding compensation related to modification of stock options, net loss was $1.4 million, or $0.07 per diluted share, as compared with net income of $3.9 million (9.9% of revenues), or $0.18 per diluted share, in the third quarter of 2006.

The decline in gross margin and the operating loss in the quarter were primarily due to the lower revenue and manufacturing levels, which were also affected by a number of manufacturing challenges faced in the Hi-Tex division. This was mainly due to the learning curve required for the manufacture of various new and complex products, as well as shorter production runs for a larger number of apparel categories.


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