On September 4, 2024, Lakeland Industries Inc (LAKE, Financial) released its 8-K filing for the fiscal 2025 second quarter ended July 31, 2024. Lakeland Industries Inc manufactures and sells safety garments and accessories for the industrial protective clothing market. Its product segments include Disposables, Chemicals, Fire, Gloves, High Visibility, High-Performance Wear, and Wovens. The company serves various industries, including oil, chemical, utilities, automobile, construction, and healthcare, across multiple geographical segments such as the United States, Latin America, Canada, Asia, Mexico, and Europe.
Performance Overview
For the second quarter of fiscal 2025, Lakeland Industries Inc reported net sales of $38.5 million, a 16.5% increase from the $33.1 million reported in the same period last year. However, this figure fell short of the analyst estimate of $39.90 million. The company also reported a net loss of $1.4 million, or ($0.19) per basic common share, compared to a net income of $2.5 million, or $0.33 per basic common share, in the prior year period. This was significantly below the analyst estimate of $0.35 earnings per share.
Key Financial Metrics
Despite the revenue growth, Lakeland Industries Inc faced several challenges. The gross margin decreased to 39.6% from 42.9% in the prior year period, primarily due to the integration of newly acquired companies and the impact of profit in ending inventory. Operating expenses increased to $16.8 million, driven by acquisition-related costs and higher SG&A expenses.
| Metric | Q2 FY2025 | Q2 FY2024 |
|---|---|---|
| Net Sales | $38.5 million | $33.1 million |
| Gross Margin | 39.6% | 42.9% |
| Net Income (Loss) | ($1.4 million) | $2.5 million |
| Earnings Per Share | ($0.19) | $0.33 |
Management Commentary
“Lakeland delivered second-quarter results below our expectations, but we believe the shortfall was due to shipment timing, and we remain confident in our full-year projections. A substantial amount of the organic revenue shortfall is related to the transition of large North American channel partner accounts to LineDrive, our new industrial market representative. LineDrive continues to build pipeline opportunities, and we believe these sales will accelerate in the second half of the year,” said Jim Jenkins, President, Chief Executive Officer and Executive Chairman.
Financial Achievements and Challenges
Despite the challenges, Lakeland Industries Inc achieved significant growth in its Fire services business, which grew over 33.5% year-over-year. The company also saw strong sales growth in Latin America, partially offset by lower sales in the U.S. and Europe. The integration of recent acquisitions, including LHD, Jolly, and Pacific Helmets, contributed $6.3 million in revenue.
However, the company faced higher manufacturing costs and increased SG&A expenses, which impacted its profitability. Adjusted EBITDA excluding FX was $2.7 million, a decrease from $4.7 million in the prior year period.
Income Statement and Balance Sheet Highlights
Gross profit for the second quarter increased by $1.0 million to $15.2 million, despite the lower gross margin percentage. Operating expenses rose due to acquisition-related costs and higher professional fees. The company reported an operating loss of $1.6 million, compared to an operating profit of $3.7 million in the prior year period.
At the end of Q2 FY2025, Lakeland Industries Inc had $24.9 million in cash and $29.5 million in long-term debt. The increase in long-term debt was primarily related to the acquisition of LHD Group.
Outlook
Looking ahead, Lakeland Industries Inc reaffirmed its guidance for fiscal 2025, expecting revenue in the range of $160 million to $170 million and Adjusted EBITDA excluding FX in the range of $18 million to $21.5 million. The company remains optimistic about its growth strategy and market opportunities in both fire services and industrial safety products.
For more detailed financial information, please refer to the 8-K filing.
Explore the complete 8-K earnings release (here) from Lakeland Industries Inc for further details.
