A week before shareholders decide whether to take the company private, Tarrant Apparel Group said it had eked out a small profit in its second quarter as the recession continues to batter the retail sector.

The Los Angeles private-label clothing maker on Thursday reported second quarter net income of $220,000 (1 cent per share) compared with a net loss of $5.3 million (-16 cents) a year ago. Net sales fell 20 percent to $41 million.

Tarrant Apparel manufactures private brand clothing for national chains and produces garments for its own brand, American Rag Cie. The quarter included a $2 million allowance for bad debts, of which $1.5 million was related to receivables from the liquidated Mervyn's chain. While sales to longtime client Macy's were down, the company recorded $7.4 million in sales to value retailer Wal-Mart.

Tarrant Apparel Group will hold a special shareholders meeting on August 20 to vote on a plan by two of its founders to take the Los Angeles apparel company private. A subsidiary of Sunrise Acquisition Co. LLC, owned by Tarrant Apparel Chairman Gerard Guez and Vice Chairman Todd Kay, proposes to pay 85 cents per share in a deal valued at $15.2 million.

Guez is the company's largest shareholder, controlling 33 percent of shares. Kay is the third largest shareholder, with a 9 percent stake.

Shares were unchanged at 83 cents in midday trading on the Nasdaq.

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