Intimate apparel manufacturer Tefron Ltd on Wednesday cut its second quarter profit and sales outlook amid challenging market conditions and product delays from a production shift to Israel.

The Bnei-Brak-based company, which makes underwear for top brands such as Victoria's Secret, Gap, Target, Nike, JC Penney and Adidas, said it now expects to post a quarterly loss of $1 million on sales of $41m.

Those figures compare to its original outlook back in May of a profit of $1m on sales of $42.4m. In the year-ago second quarter, Tefron earned $3.1m, or 25 cents a share, on sales of $49.7m.

"The primary factors impacting the sales in the second and third quarters of 2003 are greater than expected disruptions from the shift of our Alba-Waldensian production to Israel from the United States, a temporary but greater than expected decrease in sales to the company's largest customer, and challenging market conditions which are causing a delay in the introduction of certain active wear programs," Tefron said in news release.

"The company's production shift to Israel is complete but has resulted in the delay of certain new product developments and orders affecting second and third quarters."

For the third quarter, Tefron expects to break even as a result of cost savings from the production shift with sales seen at $41m compared to earnings and sales of $1.1m and $50.1m, respectively, last year.

It expects an improved performance in the fourth quarter due to the launch of several new active-wear items.

CEO Yos Shiran added: "We are optimistic about the prospects of our active wear program and believe that in spite of the delay in the introduction of parts of the program, this program shall be a significant contributor to Tefron's sales over time."