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Lakeland Industries shares slip after missing Wall Street's fiscal 2Q earnings estimate

A new manufacturing facility in Vietnam will lower costs and improve sales across Asia, according to CEO Christopher Ryan

Protective zip suit
Lakeland manufactures safety garments and accessories

Lakeland Industries (NASDAQ:LAKE), a manufacturer of industrial protective clothing, fell far short of Wall Street’s earnings estimate for its fiscal second quarter, but just cleared its revenue forecast as it outsourced more of its production work to Vietnam.

Lakeland’s net income fell to US$1.mln or US$0.12 per share for the three months ended July 31, down from US$1.8mln or US$0.25 per share in the year-ago quarter. Its revenue, meanwhile, came in at US$25.6mln, jumping from US$23.9mln in the same period a year ago.

The results failed to match the exacting standards of Wall Street analysts who had expected Lakeland to earn US$0.22 on revenue of US$25.26mln.

Investors also came away unimpressed, sending Lakeland shares down 4% to US$12.95 in Monday’s after-hours session.

CEO Christopher Ryan stressed the importance of the kick-off of operations at the company’s new manufacturing facility in Vietnam, which will substantially lower costs and improve sales across Asia.

“Manufacturing in Vietnam should provide a lower cost basis as compared to China and also presents more favorable trade conditions for our sales into Asia-Pacific, Europe, Russia, South America and North America,” Ryan said in a statement.

The introduction of an Enterprise Resource Planning software system as well as a new e-commerce strategy to improve sales via Amazon.com are two planks in the company’s plans for its digital transformation. Lakeland recently started selling via Amazon’s platform in Mexico and will soon launch on Amazon in Australia  and Europe.

“This [digital] transformation includes initiatives to generate higher sales from multiple product categories and customer segments, improve gross margins, drive operating leverage and yield sustainably higher long term financial performance and management effectiveness,” noted Ryan.

The company’s domestic sales were impacted by a three-day outage during the quarter that came about due to tracking requirements related to the installation of the company’s ERP system.

Looking outside the US, Lakeland’s sales in China and across Asia and the Pacific jumped US$0.8mln in the quarter on improved demand. UK sales, meanwhile, were also up US$0.5mln as new distributors in Europe placed initial stock orders. Sales across Russia and Kazakhstan also rose by US$0.5mln as the company brought in new customers there.

As of July, Lakeland had cash and cash equivalents of US$14.9mln and working capital of US$68.3mln.

Headquartered in Ronkonkoma, New York, Lakeland manufactures and sells safety garments and accessories for the industrial market.

Quick facts: Lakeland Industries Inc

Price: 11.05 USD

NASDAQ:LAKE
Market: NASDAQ
Market Cap: $88.45 m
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