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LAKE
Earnings call · Jul 2026 (Q2 FY27)

LAKELAND INDUSTRIES Q2 FY27 earnings call LAKE

Sep 9, 2026 Source

Executive summary

Lakeland Industries Q2 FY27 — Sequential Improvement in Revenue, Margin, and Profitability

Lakeland Industries demonstrated sequential improvement in Q2 FY27, driven by strong performance in its Fire segment and strategic repositioning efforts. While year-over-year sales saw a slight decline, excluding divested lines, growth was positive, supported by robust Fire services and specific product lines. The company is focused on operational efficiency, margin recovery, and leveraging its independent service provider platform for future growth, despite ongoing FX headwinds and the need to optimize operating expenses.

Highlights

5

  • Net sales increased 5.7% sequentially to $50.1 million.

  • Gross margin improved to 37% from 31.4% in Q1 FY27, with adjusted gross margin expanding 410 basis points sequentially to 37.7%.

  • Adjusted EBITDA excluding FX more than doubled sequentially to $2.7 million.

  • Generated $5.4 million of operating cash flow in H1 FY27, a $15.1 million year-over-year improvement.

  • Fire services revenue grew 78% year over year, with independent service provider (ISP) business contributing $3.5 million.

Concerns

5

  • Net sales were down 4.5% year over year to $50.1 million, though up 2.8% excluding divested product lines.

  • Foreign exchange was a meaningful headwind with a $1.3 million impact compared to $43,000 a year ago.

  • Recorded a non-cash goodwill impairment charge of approximately $3.2 million related to LHD Germany.

  • Adjusted EBITDA excluding FX decreased to $2.7 million from $5.1 million a year ago.

  • Operating expenses remain high, with management targeting a reduction from 32% to mid-20s to high 20s.

Guidance & targets

CategoryTargetConfidence
Fire segment organic growth rate
high single-digit to low double-digit growth
high materiality
High
Operating cash flow
positive cash flow from operations
high materiality
High
Margin and EBITDA improvement
sustainable margin and EBITDA improvement
high materiality
High
Fire orders timing
shift into the fourth quarter
medium materiality
High
Revenue trend
sequential growth from Q2 into Q3 and then Q3 into Q4
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Industrial
Reported revenue declined, but grew approximately 3% year-over-year when excluding $3.7 million from divested product lines. Growth was led by Chemical Protective and Critical Environment. Primary manufacturing facilities are at capacity with improving demand and order visibility.
Revenue (excluding divested product lines): +3%Chemical Protective growth: +9%Critical Environment growth: +28%
$24.0M-10.8%——
Fire
Revenue increased year-over-year and sequentially, now representing 52% of net sales. Growth was broad-based across product categories, driven by demand strengthening due to NFPA standards transition. Fire services platform is accelerating investment.
Revenue (Q2 FY26): $25.6MRevenue (Q1 FY27): $23.4MPercentage of net sales: 52%Helmets growth: +41%Hoods growth: +66%Turnout Gear growth: +5.5%Comparable fire revenue growth (adjusted for prior year tender and current year service acquisitions): +10%Fire services revenue growth: +78%Independent Service Provider (ISP) contribution: $3.5M
$26.1M+2%+12%—

Deals & partnerships

UK National Fire Chiefs Council Notification of intended award across multiple product categories under the National Firefighter PPE Framework Up to £220M 7 years

Lakeland was notified of an intended award under a seven-year program with a total potential value of up to £220 million across all awarded suppliers. This includes gloves, turnout gear, and boots, leveraging new product development. The company will compete for specific opportunities within this framework.

Risks & headwinds

Foreign exchange impact Q2 FY27, ongoing

$1.3 million headwind in Q2 FY27 vs $43,000 a year ago

Mitigation:Finance team taking hard look at hedging strategies; moving inventory in Latin America to mitigate peso decline impact.

Goodwill impairment Q2 FY27

$3.2 million non-cash charge

Mitigation:Leadership and organizational changes at LHD Germany; broader repositioning of the business to improve operating performance and cost structure.

High operating expenses Ongoing, next 6 months

OpEx ratio at 32% in Q2 FY27

Mitigation:Targeting reduction to mid-20s to high 20s; consolidating warehousing and manufacturing footprint; leveraging ISP build-out through revenue expansion.

Timing of fire orders Q3 FY27 to Q4 FY27

Certain fire orders expected to shift into Q4 FY27

Mitigation:Acknowledged as a near-term impact, but overall outlook is optimistic with sequential growth expected.

What to watch in Q3 FY27

Gross margin run rate

Q3 FY27 and Q4 FY27
Current 37% (37.7% adjusted)
Target Continued improvement from mid-30s normalized run rate

Why it matters

Indicates the effectiveness of structural margin recovery processes and impact of product mix.

We'll see continued improvement with the growth on the top line and improvement in turnout gear, all those are higher margins, so we'll see strengthening in the second half of the year, kind of continuing the trend from Q1 to Q2, and a little bit of improvement in Q3 and Q4.

Q&A highlights

What is the underlying gross margin run rate for the second half of the year, excluding the tariff refund?

Management expects continued improvement in gross margin, building off the mid-30s normalized run rate. Growth in top-line and higher-margin turnout gear will strengthen margins in H2 FY27, continuing the trend from Q1 to Q2 with further improvement in Q3 and Q4.

“We'll see continued improvement with the growth on the top line and improvement in turnout gear, all those are higher margins, so we'll see strengthening in the second half of the year, kind of continuing the trend from Q1 to Q2, and a little bit of improvement in Q3 and Q4.”

asked by Mark Smith · answered by Unknown Speaker

2 min read 6 chapters

Detailed narrative

Strategic Repositioning and Portfolio Optimization

Lakeland is actively repositioning its business, including divesting certain product lines and reallocating capital towards higher-growth opportunities. The company recorded a non-cash goodwill impairment charge of $3.2 million related to LHD Germany, prompting leadership changes and a broader repositioning to improve operating performance and cost structure. The resolution of the Monterey Lease Matter resulted in a $1.9 million gain and eliminated $400,000 in quarterly cash usage, simplifying the business and improving underlying operating performance.

Fire Segment Strength and NFPA Standards Transition

The Fire segment demonstrated strong performance, with revenue up 2% year-over-year to $26.1 million and 12% sequentially from Q1 FY27. Fire now represents 52% of net sales, up from 49% in the prior year. Growth was broad-based, with Helmets up 41%, Hoods up 66%, and Turnout Gear up 5.5%. Demand continues to strengthen as customers transition to updated NFPA standards, benefiting Lakeland's certified head-to-toe portfolio. The company sees high single-digit to low double-digit organic growth in this segment.

Industrial Segment Performance and Product Line Growth

Industrial businesses generated $24 million in Q2 FY27. While reported revenue was down 10.8% year-over-year, excluding $3.7 million from divested product lines, industrial revenue increased approximately 3%. Growth was led by Chemical Protective (up 9%) and Critical Environment (up 28%), with the latter back on plan after earlier demand planning and capacity actions. Primary manufacturing facilities remain at capacity, supported by improving demand and better order visibility.

Gross Margin Expansion and Drivers

Gross margin improved to 37% from 35.9% a year ago and 31.4% in Q1 FY27. Adjusted gross margin expanded 410 basis points sequentially to 37.7%. This improvement was driven by tariff refunds and a favorable product mix, partially offset by higher inbound freight, including $600,000 of expedited freight for strategic fire inventory build. Excluding the net tariff benefit of $1.4 million, gross margins still showed sequential improvement to 34%, indicating structural recovery processes are working.

Operating Expenses and Efficiency Initiatives

Operating expenses were $20.6 million, up 7% year-over-year. Adjusted operating expenses excluding FX were $16.2 million, up 11.1%, reflecting approximately $0.5 million in trade show costs, new service location startup costs, and a full quarter of service operating costs. Management is keenly focused on reducing the OpEx ratio from the current 32% to the mid-20s to high 20s, identifying opportunities for consolidation in warehousing and manufacturing footprint, particularly in Europe.

Cash Flow Generation and Balance Sheet Health

The company generated $5.4 million of operating cash flow in the first half of fiscal 2027, a $15.1 million improvement year-over-year. Cash ended the quarter at $17.9 million, up from $12.5 million at year-end. Total debt declined to $28.7 million from $32.3 million at January 31, 2026, with $24.9 million drawn on the revolving credit facility and $15.1 million availability. Inventory decreased by $2.8 million sequentially to $74.9 million, with expectations for this trend to continue as sales increase.

AI-generated summary of the company's earnings call. Not investment advice.