Victoria's Secret move hurts textile co Tefron

Textiles company Tefron Ltd. (Bulletin Board: TFRFF; TASE:TFR) may lose one of its largest and oldest customers after Victoria's Secret decided to move a production project to India, which has cost Tefron $23.5 million revenue in January-September 2009. Tefron makes seamless textiles, regular textiles, and swimwear.

The company's net loss rose to $8.3 million for the third quarter, despite a tax rebate, from $5.8 million for the corresponding quarter of 2008, while revenue fell 45% to $21 million from $38.3 million. The company lost $12.7 million in January-September.

Operating loss rose to $9.3 million for the third quarter from $7.1 million for the corresponding quarter.

Victoria's Secret and Nike are two of Tefron's largest customers. Tefron's financial report for the third quarter indicates that its relations with Nike are also in jeopardy. Neither customer has placed substantial orders during 2009, reducing Tefron's sales from sportswear to $21.8 million in January-September.

Tefron's financial situation is also dismal. Sales fell 33% to $93.3 million in January-September from $137.9 million in the corresponding period of last year. Sales in all markets, except for Israel, fell; sales in Europe were the worst hit, down 60% compared with the corresponding period. Sales in Israel actually rose 33% to $5.5 million in January-September, partly thanks to the opening of surplus outlets.

Tefron believes that the economic repercussions of the global crisis have not yet run their course, but says that it has completed streamlining measures, which will substantially cut costs this year.

Tefron is controlled by First Israel Mezzanine Investors Fund (FIMI), run by CEO Ishai Davidi, and Mivtach Shamir Holdings Ltd. (TASE:MISH), controlled by chairman Meir Shamir. Tefron's share fell 12% at the opening on the Bulletin Board today to $3.97, giving a market cap of $31 million. The share fell 8.6% on the TASE to NIS 14.

Published by Globes [online], Israel business news - www.globes-online.com - on November 30, 2009