RALEIGH, N.C. -- Battered by poor T-shirt sales, Texfi Industries reported a loss of $3.6 million in the first quarter ended Jan. 28, against a profit of $905,000, or 12 cents a share, a year earlier.

Sales dropped 18.5 percent, to $58.8 million from $72.2 million.

"The widespread weakness in apparel sales at the retail level continues to impact segments of our company as well as much of the textile industry," said L. Terrell Sovey Jr., chairman and chief executive officer.

Texfi said the sales decline reflected a 22 percent decline in the finished fabrics division, led by a 32 percent drop in sales of apparel fabrics.

The apparel division suffered a 37 percent sales drop as a result of the continued weak demand for T-shirts. However, the company said new order bookings for T-shirts increased "significantly" over the past several weeks.

Sales of gray goods rose 7 percent in the quarter.

Going forward, Sovey said he expects weakness in apparel to continue in the second quarter as retail inventories are brought further into line. The company is aggressively reducing operating and overhead costs to be in a good position to rebound when demand improves.

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