15 May 2008, Misgav, Israel - Tefron Ltd. (NYSE:TFR; TASE:TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFPTM) active wear, today announced financial results for the first quarter of 2008.

First Quarter Summary

· Quarterly revenues of $50.9 million, 4.5% above revenues of the first quarter of last year

· Operating income of $0.1 million, as compared with operating income of $5.0 million in the first quarter of last year

· EBITDA of $2.4 million, as compared with EBITDA of $7.3 million in the first quarter of last year

· Net loss of $0.7 million, or $0.03 per diluted share, as compared with net income of $3.8 million, or $0.17 per diluted share, in the first quarter of last year.

First Quarter 2008 Results

First quarter revenues were $50.9 million, representing a 4.5% increase from the first quarter of 2007 revenues of $48.8 million. The increase in revenues in the quarter was due to an increase in sales of swimwear, including revenues delayed from the fourth quarter of 2007 and an increase in sales of active-wear products. This increase was partly offset by a reduction in sales of intimate apparel.

First quarter gross margin was 12.4% compared with a gross margin of 19.1% in the first quarter of 2007. Operating income for the quarter was $0.1 million (0.3% of revenues), as compared with an operating income of $5.0 million (10.2% of revenues) in the first quarter of 2007. Net loss for the quarter was $0.7 million, or $0.03 per diluted share, as compared with net income of $3.8 million (7.8% of revenues), or $0.17 per diluted share, in the first quarter of 2007.

The decline in gross and operating margins in the quarter compared with the first quarter of last year was primarily due to the significant devaluation of the US Dollar versus the New Israeli Shekel, the higher proportion of Cut & Sew products in the active-wear sales mix which have a lower profitability than those of the Seamless products, and finally, the continuing short-term manufacturing challenges faced in the Hi-Tex division. As discussed last quarter, these challenges are mainly due to the learning curve required for the manufacture of various new and complex products, which are technologically advanced and have been ordered in short production runs for a larger number of apparel categories.

In addition, the significant devaluation of the US Dollar versus the New Israeli Shekel in the quarter increased the US Dollar value of the New Israeli Shekel denominated liabilities and accordingly resulted in increased financial expenses.

Management comments

Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, “While we are pleased with our increase in revenues, we still presented a net loss, mainly due to the weak US dollar against the shekel and manufacturing hurdles at our Hi-Tex division. We are currently focusing our efforts on overcoming these hurdles and reducing our operational costs. In the next few months, we aim to finalize the operational plan that we discussed in the prior quarter, and we expect to continue implementing the plan in the second half of the year. In the coming quarters, we hope to share with you positive news with regard to the implementation of this plan.”

Mr. Shiran continued, "On the positive side, we are happy to announce a significant new customer: Maidenfrom. We expect to record sales to Maidenform in the next few months for orders already received. Additionally, we have seen two quarters of sequential growth in our active-wear sales, mainly due to increased orders from Nike for their 'Next Generation' products. We are looking for this trend of growth in our active-wear sales to continue into the second quarter of 2008, driving a growth in our overall sales.”

Mr. Shiran concluded, “Based on our current orders, we currently expect second quarter 2008 revenues of around $45 million, driven by continued growth in active-wear sales while taking into account the seasonal decline in second quarter swimwear sales. However, we believe that the continued weakness of the US Dollar, in addition to the manufacturing hurdles of our Hi-Tex division, will continue to negatively affect our profitability, and accordingly we expect to show an operating loss for the second quarter.

About Tefron

Tefron manufactures boutique-quality everyday seamless intimate apparel, active wear and swim wear sold throughout the world by such name-brand marketers as Victoria's Secret, Nike, Target, The Gap, J. C. Penney, lululemon athletica Warnaco/Calvin Klein, Patagonia, Reebok, Swimwear Anywhere, Abercombie&Fitch , and El Corte Englese, as well as other well known retailers and designer labels. The company's product line includes knitted briefs, bras, tank tops, boxers, leggings, crop, T-shirts, nightwear, bodysuits, swim wear, beach wear and active-wear.

Source and further information: www.tefron.com