Clothing maker Tarrant Apparel Group, on Thursday (10 May) swung to a first quarter losses after it was hit by a $2m charge related to its aborted acquisition bid for lifestyle brand manufacturer The Buffalo Group.

The Los Angeles, California-based company, which designs and sources for private label and private brand casual apparel, said its net loss for the three months to 31 March was $1.0m, or $0.03 per share, compared to net income for the 2006 first quarter of $836,000, or $0.03 per diluted share.

Net sales dropped 8.5% to $56.1m, compared to $61.3m in the year earlier period, as the company was hit by the loss of the Alain Weiz, Jessica Simpson and House of Dereon brands.

Sales in its Private Brands business more than halved to $7.9m, from $19.2m in last year's quarter. Private Label sales increased in the quarter to $48.2 million from $42.1 million reported in the same period last year.

Lower overall sales meant gross profit for the first quarter slipped to $12.3m from $12.5m. However, gross margin rose to 22.0% from 20.4%, helped by greater efficiency in sourcing.

"Our first quarter results reflected continued strength in our Private Label business, and the initiatives we have pursued to improve operating results," said Gerard Guez, chairman and interim CEO.

Tarrant Apparel Group first announced plans to buy The Buffalo Group in December, but the two parties mutually agreed to end the $120m deal in April.

"While we are disappointed that we were unable to conclude the acquisition of The Buffalo Group, we believe the growing sales of American Rag CIE along with our Private Label business will result in another year of solid growth and improved profitability," added Guez. 

The company expects 2007 full-year revenue of $230m to $240m.