Off-price apparel retailer Factory 2-U Stores Inc on Wednesday posted a second quarter net loss of $4.6 million, before a pre-tax charge of $2.1m, and said its CEO Mike Searles would quit as soon as a replacement is found.

The operator of more than 250 stores said in the year-ago period it made $0.7m before recording a special charge of $1.6m. It added its quarterly sales fell eight per cent $128.1m from $139.3m and same-store sales slumped 8.7 per cent.

Searles, who will remain as a board member, said: "Although our second quarter loss was higher than anticipated back in June, it reflects the heavy investment made to stimulate customer traffic, both old and new.

"I believe that we have embarked on all the initiatives required to attract old and new customers to our stores and we will see this unfold, as previously communicated, during the third and fourth quarters of this fiscal year."