Shares of protective clothing manufacturer Lakeland Industries plunged almost 15% after the closing bell yesterday, Wednesday, January 22, before declining even more in premarket trading today. This came after the company announced a proposed stock offering, citing the need for cash to pay down debt accrued during an M&A spree.
Details
In after-hours trading yesterday, Lakeland stock plunged almost 15.0% to $21.70 per share, before dropping another 15.7% before the opening bell today. Still, it is up nearly 46% in the last 12 months.
After the market closed yesterday, the company announced a proposed public offering but did not disclose details — neither in the press release nor in the filing submitted to the U.S. SEC. The prospectus states only that 7.4 million Lakeland shares are currently outstanding (excluding shares issued for accounting purposes and employee incentives) with the last reported share price at $25.94 apiece at the close on Tuesday, January 21.
Capital dilution is always a red flag for investors, says Sergey Glinyanov, a senior analyst at Freedom Finance Global. He recalled that in August 2017, Lakeland increased the number of outstanding shares by roughly 10%. At the time, the stock also plummeted before bouncing back.
According to the press release, Lakeland plans to use the proceeds for the “repayment of certain indebtedness,” as well as operational and business development. As of October 31, 2024, the company’s total debt stood at $31 million.
About Lakeland
Lakeland manufactures and sells protective clothing and accessories for industrial companies and first responders. Its in-house sales teams and distributors operate in more than 50 countries. The company’s customers include the oil, chemical, automotive, and transportation industries, as well as fire and rescue services, law enforcement agencies, the U.S. Department of Defense, and disease control centers.
Lakeland has expanded significantly over the past year. In February 2024, it acquired Jolly, a manufacturer of footwear for firefighters, the military, and police, for $9.3 million. In the summer, it bought German peer LHD Group Deutschland and its subsidiaries in Hong Kong and Australia for about $16.3 million, expanding its footprint in two of the three largest fire markets in the world. In December, the company announced the acquisition of firefighter protective apparel manufacturer Veridian for approximately $25 million.
In its most recent earnings report, for the fiscal-2025 third quarter (ended October 31), Lakeland posted 44.5% year-over-year growth in net sales to $45.8 million. For the full year, the company expects revenue of at least $165 million and adjusted EBITDA, excluding currency fluctuations, of about $18 million.
Analyst insights
According to MarketWatch, the two analysts covering Lakeland both rate it a “buy.” Their average target price of $28 per share suggests upside of almost 10%.
In the summer, Simply Wall St set a target price of $31.46 per share for Lakeland, later lowering it to $28.00 per share. While their team expects the company’s strategic acquisitions and cross-selling opportunities to drive revenue and net profit growth, they also note that its inorganic growth has raised expenses and debt, resulting in lower margins and stability.
