(Filed Under Financial and General Interest News). iFabric’s abrupt exit from the sleepwear market resulted in a 62% drop in sales and a CD$222,058 (about $163,000 at current exchange rates) loss in its fourth quarter ended September 30, 2018.
For the year, the Toronto-based firm’s earnings fell to CD$927,257 (about $682,000) on reduced sales of CD$15,121,370 (about $11.1 million) compared to earnings of CD$1,589,922 on sales of CD$18,856,477 last year.
iFabric does business through two distinct divisions, Intelligent Fabric Technologies (North America), and Coconut Grove Pads. The latter included the now-abandoned sleepwear products, which used a Maidenform license.
Of the results, president and CEO Hylton Karon remarked, “2018 represents a transition year for iFabric, as we saw an expected decrease in revenues, especially in the fourth quarter, resultant from the previously announced phase out of our sleepwear offerings and some delays in shipping chemicals to a major customer, which was not of our making. We have exited the sleepwear business well ahead of a curve that shows extremely bad fundamentals for the sleepwear market in terms of future profitability. On a positive note, I am pleased to report that we have locked in our sleepwear profits and have been able to convert the bulk our sleepwear assets back into cash. We currently have a very strong balance sheet, with excellent liquidity and we are well positioned to capitalize on new opportunities in far larger markets.”
The company listed, in Canadian dollars, the highlights of the quarter and full year: “revenues of $2,491,691 compared to $6,610,766 in Q4 2017, representing a decrease of $4,119,075 or 62%. Revenues for the Intelligent Fabrics Division were $1,019,193 compared to $896,839 in Q4 2017, representing an increase of $122,354 or 14%. Revenues for the Apparel Division were $1,446,897 compared to $5,677,077 in Q4 2017, representing a decrease of $4,230,180 or 75%. Gross profit decreased by 68% or $1,919,117 to $882,628 from $2,801,745 in Q4 2017. Gross profit margins decreased from 42% in Q4 2017 to 35% in Q4 2018. This decrease was mainly as a result of the Intelligent Fabrics Division accounting for a higher proportion of revenues at lower margins in 2018 compared to 2017.”
Looking ahead at the next fiscal year, Karon focused on three areas: performance apparel, medical and intimate apparel. “As mentioned in prior releases, we are limiting our intimate apparel focus to our core bra and accessories business. Portion of the resources freed up from our exit of the sleepwear market have been allocated to increasing our sales force, marketing and design teams, as well as substantially increasing our expertise in selling online. We have designed a number of unique new products in this segment and will be launching these to the market in a phased roll out over the course of the next 12 to 18 months. Our core business remains solid with good margins and I believe that the contribution from this area of our business will continue to cover the bulk of our overheads as we complete the process of transforming iFabric into a market leading performance apparel and medical textile supplier.”
He continued, “the first of our performance apparel programs for a major Canadian retailer commenced shipping at the end of our third quarter. I am pleased to report that the retail sell through of these products to date has been exceptional. As a result, we will be meeting with the retailer early in the New Year to renew these programs and add additional programs. I am also pleased to report that bulk trials of similar products for a major U.S. retailer will commence the New Year and if successful would lead to substantial areas of new business for iFabric. I believe that our textile expertise, market leading textile technologies and the ability to produce high quality performance apparel at very competitive prices, is showing that we are in a unique position to exploit one of the largest segments of the apparel market. Finally, in addition to the medical EPA regulatory initiative discussed below, we are pursuing a further EPA initiative for the performance apparel market.”
Commenting on the opportunity in medical products, Karon concluded, “we completed a substantial body of testing during the 2018 fiscal year. Based on the test results, I am optimistic that our goal of securing higher level claims from the EPA for the medical market is now attainable within a reasonable time frame. As a result, we will be conducting clinical trials at the medical facilities of a major healthcare group in the U.S., in conjunction with one of our Protx2 customers, who will be supplying products as well as funding for the trials. Based on our projected time lines to produce the necessary products and establish the trial monitoring systems, we expect the trials to commence during the summer of 2019. I will provide further information in this regard once the final timetable has been confirmed.”
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