Apparel firm Movie Star Inc reported lower second-quarter net income, as net sales fell slightly below last year's.

Quarterly income totalled US$578,000 compared to $610,000 for the second quarter of 2006.

Net sales, meanwhile, fell 2.0% to $17.52m from last year's $17.87m.

Gross margin, as a percentage of sales, increased five percentage points to 34.6% for the fiscal 2007 second quarter from 29.6% a year ago.

During the first half of the year, net income was $944,000 compared to $239,000 in the first half of 2006.

Net income for the first half of fiscal 2007 included $1.34m in fees associated with the merger with Frederick's of Hollywood and the aforementioned gain on the sale of property, plant and equipment, which is primarily the result of the sale of the company's former distribution centre in Pennsylvania.

President and CEO Mel Knigin said: "We are encouraged with our financial results through the first half of fiscal 2007. Our gross margins were strong despite a modest decline in second-quarter sales.

"The gross margin percentage was one of our highest for a quarterly period and was due primarily to a more profitable product mix and lower markdowns."

Knigin continued: "We expect our second-half sales to compare favourably to last year's second half, as a result of our strong open order position, which was approximately $25m at 31 December 2006, compared with $17m at 31 December 2005."

Movie Star designs, manufactures (through independent contractors), imports, markets and distributes women's wear to mass merchandisers, specialty and department stores, discount retailers, national and regional chains and direct mail catalogue marketers throughout the US.