The new man at the helm of knitted apparel firm Hampshire Group has warned of a tough year ahead after the company's first quarter losses widened.

Newly installed CEO Michael Culang has already initiated a restructuring and cost reduction plan at Hampshire, involving job cuts and the consolidation and relocation of operations.

This includes the closure of the company's office in Hauppauge, New York.

The women's divisions will be centralised in New York, Hampshire's Hong Kong subsidiary will expand its capabilities, and certain back office functions in its South Carolina office will be consolidated.

The company recorded a pre-tax loss of US$5.5m in the three months ended 29 March, compared to $4.9m in the same period last year.

Net sales fell 2% to $39.8m, thanks to the weak retail market, but partially offset by higher prices.

"If these retail conditions persist, which the company believes appears likely for the balance of the year, net sales will be adversely affected in 2008," said Hampshire.

Culang said: "The first quarter was very challenging and we expect these challenges to continue given the deteriorating economic conditions faced by both our customers and consumers."

He added that the company would further tighten its cost management, expanding the role played by its offices in Asia and continuing its policy of exiting under-performing businesses.