Third quarter profit at T-shirt and sweatshirt maker Delta Apparel Inc edged up by 4% as sales at FunTees and Soffe were offset by lower demand in the Delta catalogue and Junkfood businesses.

Net income for the third quarter was $2.8m, or $0.32 per diluted share, compared to the prior year's level of $2.7m, or $0.31 per diluted share.

For the third quarter ended 31 March, the Duluth, Georgia-based branded and private label maker said net sales increased 22.6% to $85.0m, from $69.4m in last year's quarter.

The acquisition of the FunTees private label business last October dragged down gross margins to 24.4% from 27.7% in the prior year. However, Delta Apparel says margins are expected to increase in fiscal year 2008 as "lower cost textile manufacturing is achieved from the integration into Delta's textile facility".

Sales of retail-ready apparel, which includes the Soffe and Junkfood businesses, fell 0.4%, to $32.7m on lower sales of licensed T-shirts.

Operating income in the retail-ready segment increased $0.2m to $4.1m due primarily to manufacturing improvements in the Soffe business.

Robert W Humphreys, president and CEO, said: "Sales growth was impacted by order reductions at Junkfood and slower than expected sell-through of the Soffe products at retail stemming from colder weather that lasted throughout the third quarter in many regions of the country.

"Many of our initiatives at Junkfood, including new licenses and enhanced products, are gaining traction with our customers and we expect to achieve revenue growth in the Junkfood business in the fourth quarter compared to the prior year period."

The activewear segment, which includes Delta Apparel and FunTees, reported sales of $52.3m for the quarter compared with $36.6m last year. The increase in sales was mainly due to the inclusion of FunTees sales of $19.0m, offset by an 8.7% decline in sales in the Delta business.

Delta chose not to match lower marketplace pricing for basic T-shirts, which decreased total unit volume by 9.4% but slightly improved average selling price. Operating income declined $0.1m to $1.1m due to these factors.

For the fourth quarter the company expects sales to be in the range of $100m to $106m and diluted earnings to be in the range of $0.50 to $0.55 per share. This compares to sales of $82.5m and diluted earnings of $0.73 per share in the prior year fourth fiscal quarter.

For the 2007 fiscal year, net sales are forecast to be $320m to $326m and diluted earnings per share of $1.15 to $1.20.