US clothing firm Delta Apparel has swung to a net loss for the second quarter of US$2.8m, compared to the prior year's net income of $0.6m, following a slowdown in quarterly sales growth.

The company said that net sales for the three months ended 29 December were $68.8m compared to $72.9m in the prior year's second quarter.

It said the decrease was due to lower FunTees sales, offset partially by higher sales in its Delta catalogue, Soffe and Junkfood businesses.

Gross margins declined 630 basis points to 15.8%, the company said, primarily as a result of textile restructuring related costs, higher raw material prices, increased transportation costs and sales of a more basic mix in its T-shirt business.

The company previously announced, in July, an overall restructuring plan which included the closing of its Fayette, Alabama manufacturing facility, the expensing of excess manufacturing costs with the FunTees integration and the expensing of start-up costs stemming from the opening of its Honduran textile facility.

In an update it said that the restructuring plan is expected to be completed by the end of the third quarter of fiscal 2008 for a total cost of approximately $11.9m.

In the second quarter it expensed $2.0m related to excess textile manufacturing costs and start-up costs from the opening of its Honduran textile facility, Delta added.

Robert W Humphreys, Delta Apparel president and CEO, said: "During the quarter we made significant progress executing our textile restructuring plan.

"Our new, state-of-the-art textile facility in Honduras began producing first-quality dyed fabric during the quarter, and is on pace to reach our initial goal of producing over 500,000 pounds of fabric per week in our fiscal fourth quarter.

"This facility should provide our activewear business with lower cost production to drive enhanced profitability in the near future.

"Despite the slowing retail environment, we achieved sales growth in both of our retail-ready businesses by penetrating new markets and establishing additional doors for our products.

"While we are cautious about the retail conditions in the marketplace, we believe we are positioned to achieve our sales and earnings goals in the second half of our fiscal year.

"Our manufacturing operations are focused on continued cost savings and quality improvement.

"Our new offshore textile production, team sewing and consolidation of offshore cutting should provide us with a lower cost manufacturing platform for the future.

"We continue to build new customer relationships and open new doors across most apparel distribution channels. We believe these initiatives will place us in a strong position for future growth."

For the third fiscal quarter ending in March, the company expects sales to be in the range of $84 to $88m and diluted earnings to be in the range of $0.25 to $0.29 per share, compared to sales of $85.0m and diluted earnings of $0.32 per share in the prior year third fiscal quarter.

For the 2008 fiscal year, the company continues to expect net sales to be in the range of $325 to $340m and diluted earnings per share to be in the range of $0.62 to $0.76.

Restructuring related expenses for the full-year are expected to total approximately $5.0m on a pre tax basis, or approximately $0.39 per diluted share.