Lakeland Industries Q2 Earnings Call Highlights

Key Points

• Revenue and profitability trends improved sequentially: Fiscal Q2 revenue was $50.1 million, down 4.5% year over year but up 5.7% from Q1, while gross margin rose to 37.0% and adjusted EBITDA more than doubled to $2.7 million. The company still posted a $4.9 million net loss, including a $3.2 million non-cash goodwill impairment charge.
• Fire operations led growth: Fire revenue increased 2% year over year and 12% sequentially to $26.1 million, representing 52% of sales, with especially strong helmet and hood growth. Fire services revenue surged 78%, and Lakeland is expanding its independent service-provider footprint.
• Management expects further improvement: Lakeland anticipates sequential revenue growth in Q3 and Q4, supported by fire demand, tender awards and recovering industrial markets. The company also strengthened its balance sheet, ending the quarter with $17.9 million in cash, lower debt and improved operating cash flow.

Lakeland Industries NASDAQ: LAKE reported fiscal second-quarter 2027 revenue of $50.1 million for the period ended July 31, 2026, down 4.5% from a year earlier but up 5.7% sequentially, as growth in its fire business and improving margins helped offset declines associated with divested product lines.

President, CEO and Executive Chairman James Jenkins said revenue increased 2.8% excluding $3.7 million of prior-year sales from product lines the company divested in March. Gross margin rose to 37.0%, compared with 35.9% in the prior-year quarter and 31.4% in the fiscal first quarter. Adjusted EBITDA excluding foreign exchange effects more than doubled sequentially to $2.7 million from $1.1 million.

The company recorded a net loss of $4.9 million, or $0.50 per share, compared with net income of $0.8 million, or $0.08 per share, a year earlier. The quarterly loss included a roughly $3.2 million non-cash goodwill impairment charge related to LHD Group Deutschland GmbH.

Fire Business Expands Share of Revenue

Fire revenue totaled $26.1 million, up 2% year over year and approximately 12% sequentially, accounting for 52% of total sales. That compared with 49% in both the prior-year period and the first quarter. Within fire, helmet sales increased 41%, hood sales rose 66%, and turnout gear revenue increased 5.5%.

Jenkins said comparable fire revenue grew about 10% after adjusting for a prior-year tender and current-year service acquisitions. During the question-and-answer session, he said the company is seeing “high single, low double-digit growth” organically in the fire business.

The company cited strengthening demand as customers transition to updated National Fire Protection Association standards. Lakeland said its certified product portfolio, including helmets, turnout gear, boots and gloves, enables customers to source a full range of equipment from one supplier.

Fire services revenue rose 78% year over year, with the independent service provider, or ISP, operation contributing $3.5 million during the quarter. Lakeland plans to open a Denver ISP location during the month and is evaluating further expansion opportunities in the Midwest, Texas and the East Coast.

Jenkins said a greenfield service location generally requires $350,000 to $500,000 of capital. He added that individual service locations can reach capacity at approximately $2.5 million to $3.5 million in revenue, depending on facility size, though the company can expand facilities or add locations. Lakeland said its existing ISP footprint could potentially generate $5 million to $6 million in quarterly revenue as planned growth develops.

Industrial Sales and Tender Activity

Industrial revenue was $24 million, down 10.8% on a reported basis. Excluding the $3.7 million contribution from divested product lines in the prior-year quarter, industrial revenue increased about 3%. Chemical protective product sales rose 9%, while critical-environment sales increased 28%.

Jenkins said critical-environment operations returned to plan following forecasting, demand-planning and capacity actions undertaken earlier in the year. The company’s primary manufacturing facilities remain at capacity, supported by improved demand and order visibility.

Lakeland also announced tender and contract awards across nine countries in fire, disaster response, law enforcement, industrial and utility markets. Among them was notification of an intended award under the U.K. National Fire Chiefs Council’s National Firefighter PPE Framework, a seven-year program with total potential value of up to £220 million across all awarded suppliers.

Kevin Rae, executive vice president of EMEA fire sales, said Lakeland qualified across multiple product categories, including gloves, turnout gear and boots. He said 25 fire brigades in the U.K. enter contracts at different times, with a “considerable amount” of activity expected over the next 12 to 18 months. Jenkins noted that revenue timing from tenders varies by region and contract structure.

Margins, Costs and Balance Sheet

CFO J. Calven Swinea said gross profit was $18.5 million, down 1.5% from $18.8 million a year earlier. Gross margin benefited from $1.4 million in net tariff refunds and a more favorable fire revenue mix, partly offset by higher inbound freight costs. The company incurred about $600,000 in expedited freight related to a strategic fire inventory build.

Excluding the tariff benefit, gross margin was 34%, representing a 280-basis-point sequential improvement. Swinea said Lakeland expects continued margin improvement in the second half as fire and turnout-gear sales grow, though it does not expect a significant tariff-refund effect during that period.

Operating expenses rose 7% to $20.6 million. Adjusted operating expenses excluding foreign exchange were $16.2 million, up 11.1%, reflecting approximately $500,000 in Interschutz trade-show costs, service-location startup expenses and a full quarter of service operating costs. Management said the trade-show expense is infrequent, while ISP costs are expected to be increasingly supported by revenue as locations mature.

• Cash at quarter-end was $17.9 million, up from $12.5 million at fiscal year-end.
• Total debt declined to $28.7 million from $32.3 million at Jan. 31, 2026.
• Operating cash flow was $5.4 million in the first half, a $15.1 million year-over-year improvement.
• Inventory declined to $74.9 million, down $2.8 million sequentially and $15.3 million from a year earlier.

The company also resolved its Monterrey lease matter, resulting in a $1.9 million second-quarter gain and permanently eliminating approximately $400,000 of quarterly cash usage, according to Jenkins.

Outlook and Portfolio Changes

Management said it expects some fire orders to shift into the fiscal fourth quarter but anticipates sequential revenue growth in both the third and fourth quarters based on its pipeline and order flow. Jenkins said the third quarter should show material year-over-year improvement in industrial markets in North America and Asia, alongside another quarter of sequential margin improvement.

Lakeland is evaluating geographic, warehousing and manufacturing consolidations as part of a broader effort to simplify operations and reallocate capital toward higher-growth opportunities. Jenkins said the company expects “meaningful changes” over the next six months that could benefit results in fiscal 2028.

The company remains focused on generating positive cash flow from operations during fiscal 2027 and improving sustainable margins and EBITDA, management said.

About Lakeland Industries (NASDAQ:LAKE)

Lakeland Industries, Inc NASDAQ: LAKE is a global provider of high-performance protective apparel and accessories designed to safeguard workers in industrial, healthcare, laboratory, and emergency response environments. The company's expertise lies in producing garments that shield against chemical, biological, radiological, and thermal risks, supporting safety protocols in sectors such as oil and gas, petrochemicals, pharmaceuticals, and first responders.

The product portfolio encompasses both single-use and reusable solutions, including chemical protective coveralls, flame-resistant garments, arc flash clothing, medical isolation gowns, and cleanroom suits.

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