Research & Analysis: Lakeland Industries (NASDAQ: LAKE)

Microcap Lakeland Industries has huge growth potential through greenfield & brownfield acquisitions.

How important is fire safety? Though the timing of this inquiry may be fortuitus, the uncovering of this company and the current state of Southern California are uncorrelated. This week’s single-name stock report covers Lakeland Industries (NASDAQ: LAKE). Lakeland is a global provider of quality safety products, catering to the blue-collar workforce, first responders, and emergency situations.

There are a few factors about Lakeland that stick out to me:

- Positive growth outlook through organic growth & M&A.

- Significant insider share purchases.

- Inventory build is being brought to the market in the next two quarters, unlocking significant free cash flow generation.

Though Lakeland primarily focuses operations in fire services, equipment offerings are also appropriate for the chemicals, manufacturing, and energy industries, cleanroom, and other industries that may require protective gear. Lakeland produces both durable, high-end clothing as well as single-use disposable suits.

One of Lakeland’s core drivers is managing a resilient supply chain, meaning that the firm owns its seven manufacturing facilities. Despite the broad reach, Lakeland has a small team of 95 sales employees across 24 countries with selling efforts reaching 50 countries.

Lakeland’s primary market is in the US, deriving 44% of total external sales.

In the last quarter, Lakeland’s Fire Services segment has grown as its largest contributor to net sales. This aligns with management’s initiative in acquiring smaller manufacturers and consolidating the fragmented industry, primarily in fire protection.

Lakeland brought in James M. Jenkins as the company’s new President & CEO on May 20, 2024, following Charlie Roberson’s departure. The transition was potentially the result of the PFAS litigations; however, the details pertaining to his departure are not certain. According to a press release, Mr. Roberson left on good terms with a continuation of his restricted stock units vesting according to scheduled dates as well as the waiver of his non-compete. Mr. Jenkins has been part of the company’s board since 2012.

Long-term, Lakeland’s growth strategy is in expanding its reach in Fire Services and Industrial PPE verticals through strategic acquisition and geographical expansions. Management’s goal is to grow Lakeland’s Fire Services segment to become one of the top three manufacturers and suppliers of head-to-toe fire gear. Lakeland has made a number of acquisitions in the last three years, primarily in the Fire Services segment: