US apparel giant Nautica Enterprises Inc on Tuesday swung into a first quarter net loss of $2.6 million amid falling sales and a $2.1m charge related to the axing of a distribution centre in Maine.

The New York-based company, which made $3.2m in the year-ago period, said in a statement it was optimistic about its performance for the rest of the fiscal year.

It added sales fell to $125.9m from $135.2m in the year-ago quarter, while its gross margin rose 160 basis points from the prior-year period, boosted by inventory liquidation in the fourth quarter.

Nautica chief executive, Harvey Sanders, said: "We are especially pleased to have posted a substantial increase in gross margin, which was driven by improved inventory management and the sales contribution from some of our higher gross margin businesses, such as Earl Jean."

He continued: "While the near-term continues to be challenging, our business strategy remains on plan and we look to the second half of fiscal 2003 with optimism as our initiatives take hold.

"We have a healthy balance sheet, generate strong and consistent free cash flow as a result of the profitability in several of our businesses and continue to benefit from better inventory management. We believe we are positioning ourselves for improved results."