Tarrant Apparel Group on Wednesday said fourth-quarter income plummeted 80.7 percent primarily because of lower sublicensing income, but full-year results showed a profit compared with a year-ago loss.

Income for the three months ended Dec. 31 was $325,000, or 1 cent a diluted share, versus $1.7 million, or 6 cents a diluted share, a year ago. Sales for the three months ended Dec. 31 retreated 0.2 percent to $57.3 million from $57.4 million. The gross margin rate fell to 19.3 percent from 23.8 percent a year earlier.

Sales in the company’s private brands division rose 6.2 percent to $12.8 million because of a $1.1 million boost in its American Rag Cie business.

In 2007 overall, Tarrant posted earnings of $1.7 million, or 6 cents, reversing losses of $22.2 million, or 73 cents, in the prior year as sales advanced 4.9 percent to $243.7 million from $232.4 million.

Tarrant said this month that it reached a settlement with the IRS to pay a total of $14 million in back taxes, interest and penalties covering the seven years ended in 2002.

“During 2007, we continued our growth, despite the discontinued sales of three brands in the year, and a difficult environment during the second half of the year. The liquidation of all our Mexico assets for cash, as well as the resolution of the tax issue with the Internal Revenue Service has strengthened our balance sheet and allows us to drastically reduce our borrowing costs,” said Gerard Guez, chairman and interim chief executive officer.