LAKELAND INDUSTRIES INC (LAKE)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the historical financial statements and other financial information included elsewhere in this quarterly report on Form 10-Q. This Form 10-Q may contain certain forward-looking statements. When used in this Form 10-Q or in any other presentation, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “project,” “plan,” “seek,” “will,” “may,” “might,” “would,” “could” and similar expressions, are intended to identify forward-looking statements. They also include statements containing a projection of sales, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.

The forward-looking statements in this Form 10-Q are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to us. These statements are not statements of fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from expectations are:

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we are subject to risk as a result of our international manufacturing operations and are subject to the risk of doing business in foreign countries, particularly in China, Vietnam and India, including risks relating to the impacts of tariff policies and other trade maneuvers, which could affect our ability to manufacture or sell our products, obtain products from foreign suppliers or control the costs of our products;

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a terrorist attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue could negatively impact our domestic and/or international operations;

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our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates;

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our results of operations may vary widely from quarter to quarter;

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disruption in our supply chain, manufacturing or distribution operations could adversely affect our business;

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climate change and other sustainability matters may adversely affect our business and operations;

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because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could negatively impact our inventory levels and net sales;

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we face competition from other companies, a number of which have substantially greater resources than we do;

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our operations are substantially dependent upon key personnel;

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technological change could negatively affect sales of our products and our performance;

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cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations;

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data privacy and security laws relating to the handling of personal information are evolving across the world and may be drafted, interpreted, or applied in a manner that results in increased costs, legal claims, fines against us, or reputational damage;

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our success depends in part on our proprietary technology, and if we fail to obtain or enforce our intellectual property rights successfully, our competitive position may be harmed;

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our inability to successfully identify, consummate and integrate current and future acquisitions and strategic investments or to realize anticipated cost savings and other benefits could adversely affect our business;

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we are implementing a new enterprise resource planning system;

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we have identified a material weakness in our internal control over financial reporting;

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covenants in our credit facilities may restrict our financial and operating flexibility;

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we may need additional funds, and if we are unable to obtain these funds, we may not be able to expand or operate our business as planned;

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adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations;

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we are subject to certain U.S. and foreign anti-corruption laws and other laws and regulations as a result of our international operations;

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we are exposed to U.S. and foreign tax risks;

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we may be subject to product liability claims, and insurance coverage could be inadequate or unavailable to cover these claims;

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environmental laws and regulations may subject us to significant liabilities;

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provisions in our restated certificate of incorporation and by-laws and Delaware law could make a merger, tender offer or proxy contest difficult; and

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the other factors referenced in this Form 10-Q, including, without limitation, in the sections entitled “Part I – Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the factors described under “Risk Factors” disclosed in our fiscal 2026 Form 10-K.

We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements that are based on current expectations. Furthermore, forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events or otherwise, except as may be required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors.

Business Overview

We manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. In addition, we provide decontamination, repair and rental services that complement our fire services portfolio. Our products are sold globally by our in-house sales teams, our customer service group, and to a strategic and selective global network of authorized distribution partners. Our authorized distributors supply end users across various industries, including integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical and high-tech electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. We also supply federal, state and local governmental agencies and departments, including fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell to a mixture of end-users directly and to industrial distributors, depending on the particular country and market. In addition to the U.S., sales are made into more than 50 foreign countries, the majority of which are into China, the European Economic Community ("EEC"), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Uruguay, Middle East, Southeast Asia, New Zealand, Australia and Hong Kong.

The Company’s strong market position across its focus product categories and markets is supported by continued and increasing investment in its global footprint, particularly owning and operating its own manufacturing facilities, acquiring complementary companies or products that expand and enhance product offerings and/or geographic customer territories and investing in sales and marketing resources in countries around the world. We believe that ownership of manufacturing is the cornerstone of building a resilient supply chain and providing high-quality products to our customers. Having ten manufacturing locations in eight countries on five continents, and sourcing core raw materials from multiple suppliers in various countries affords Lakeland superior manufacturing capabilities and supply chain resilience compared to our competitors who use contractors. Additionally, our focus on providing customers with best-in-class service includes the strategic location of our sales team members.

Lakeland is committed to protecting the world’s workers, first responders, and communities while creating value for its shareholders. Key elements of our corporate strategy include:

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Creating a high-performance culture driven by our corporate values,

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Investing resources in high-growth geographies and product categories,

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Building a premier global firefighter safety brand through product and marketing enhancements,

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Driving profitable growth in high-end chemical and limited-use/disposable protective clothing through product development, strategic pricing initiatives, channel diversification, and operations optimization, and

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Acquiring companies that improve Lakeland’s competitive advantage in focus markets.

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On September 15, 2025, the Company acquired 100% of U.S.-based Arizona PPE Recon, Inc. (“Arizona PPE”) for cash consideration of approximately $4.1 million, subject to post-closing adjustments and customary holdback provisions. Founded in 2016, Arizona PPE is the leading UL-certified independent services provider (“ISP”) for performing advanced decontamination, inspection and repairs on firefighting garments for the Arizona market, as well as providing educational and training classes to fire departments and personnel to help them implement and adhere to NFPA 1851 guidelines.

On September 15, 2025, the Company acquired 100% of U.S.-based California PPE Recon, Inc. (“California PPE”) for a combination of approximately $2.4 million in cash consideration and 227,728 unregistered shares of the Company's common stock with an estimated fair value of $3.3 million at the date of acquisition, subject to post-closing adjustments and customary holdback provisions. Founded in 2022, California PPE is a leading and rapidly expanding UL-certified ISP in the California firefighting services market, one of the largest fire markets in the U.S. It also provides advanced decontamination, repair, and inspection of firefighting personal protective equipment, along with rental services and sales of cleaning detergents, extractors, and dryers.

We sold our high performance FR/AR apparel line and our high visibility clothing line on March 27, 2026.

Our net sales attributable to customers outside the U.S. were $27.3 million and $26.0 million for the three months ended April 30, 2026 and 2025, respectively.

Key Trends Affecting Our Operations

Trade Policies and Regulations

Since early 2025, the executive branch of the U.S. government has pursued a policy of imposing tariffs on imports from many foreign countries, including countries where the Company has manufacturing facilities, such as China, India, and Vietnam, among others. In response, China and other countries announced retaliatory tariffs against certain U.S. imports. These tariffs have been, and may continue to be, announced, amended, paused, reinstated and rescinded with little or no advance notice. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”), and the U.S. Court of International Trade (“CIT”) subsequently ordered U.S. Customs and Border Protection to process refunds of tariffs paid under the IEEPA. While we have submitted claims for refunds related

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following summary together with the more detailed business information and consolidated financial statements and related notes that appear elsewhere in this Form 10-K and in the documents that we incorporate by reference into this Form 10-K. This document may contain certain “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. This information involves risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. In this Form 10-K, (a) “FY” means fiscal year; thus for example, FY26 refers to the fiscal year ended January 31, 2026, and (b) “Q” refers to a quarter; thus, for example, Q4 FY26 refers to the fourth quarter of the fiscal year ended January 31, 2026.

Overview

Lakeland Industries, Inc. and Subsidiaries, doing business as “Lakeland Fire + Safety” (“Lakeland,” the “Company,” “we,” “our” or “us”), manufacture and sell a comprehensive line of fire services and industrial protective clothing and accessories for the industrial and first responder markets. In addition, we provide decontamination, repair and rental services that complement our fire services portfolio. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a strategic and selective global network of authorized distribution partners. Our authorized distributors supply end users across various industries, including integrated oil, chemical/petrochemical, automobile, transportation, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical and high-tech electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. We also supply federal, state and local governmental agencies and departments, including fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. Internationally, we sell to a mix of end-users directly and to industrial distributors, depending on the particular country and market. In addition to the United States (U.S.), sales are made into more than 50 foreign countries, the majority of which were into China, the European Economic Community ("EEC"), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Uruguay, Middle East, Southeast Asia, Australia, Hong Kong and New Zealand.

We had net sales of $192.6 million in FY26 and $167.2 million in FY25.

We have operated facilities in Mexico since 1995 and in China since 1996. Beginning in 1995, we moved the labor-intensive sewing operation for our limited use/disposable protective clothing lines to these facilities. Our facilities and capabilities in China and Mexico provide access to a labor pool that is less expensive than that available in the U.S. and permits us to purchase certain raw materials at a lower cost than are available domestically. During FY25 and continuing into FY26, the Company was impacted by tariff costs on certain products imported from China. In addition, U.S. trade policy has undergone significant shifts under the Trump administration, including the imposition of new and expanded tariffs on key trading partners such as China, Vietnam, Canada, Mexico, and the European Union. These developments, along with potential retaliatory tariffs, have created increased uncertainty and cost pressures. In prior years, the Company has been able to pass along a portion of costs resulting from tariffs to its customers, but there is no guarantee that we will be able to successfully do so in the future.

During FY26, we expanded our product portfolio, geographic reach and services capabilities as part of our strategy to build a premier global fire services brand. However, our operations were impacted by external factors such as increases in freight costs, raw material inflation and ongoing supply-chain disruptions. In addition, we have experienced uncertainty in certain markets, certification timing delays and material flow challenges. These factors have negatively impacted our production efficiency, revenue timing and gross margins. We are continuing to implement initiatives to improve operational and manufacturing efficiencies, reduce inventory levels and prioritize liquidity and debt reduction.

We added manufacturing operations in Vietnam and India in fiscal 2019 to offset increasing manufacturing costs in China and further diversify our manufacturing capabilities. Our China operations will continue primarily manufacturing for the Chinese market and other markets where duty advantages exist. Manufacturing expansion is not only necessary to control rising costs, but also for Lakeland to achieve its growth objectives.

We have two U.S. based manufacturing locations through our acquisition of Veridian Limited in FY25. These facilities currently produce Veridian’s brand of fire turnout gear and gloves, but they are in the process of being certified to produce Lakeland turnout gear for the U.S. market. They are also capable of producing Lakeland’s woven and high-performance garments. In addition, as part of our broader strategy to expand our fire services platform, we completed the acquisitions of Arizona PPE and California PPE in FY26 that enhance our service capabilities in cleaning, inspection, repair, and rental of personal protective equipment.

Our net sales attributable to customers outside the U.S. were $111.0 million and $106.8 million for the fiscal years ended January 31, 2026 and 2025, respectively.

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On September 15, 2025, the Company acquired 100% of U.S.-based Arizona PPE Recon, Inc. (“Arizona PPE”) for cash consideration of approximately $4.1 million, subject to post-closing adjustments and customary holdback provisions. Founded in 2016, Arizona PPE is the leading UL-certified independent services provider (“ISP”) for performing advanced decontamination, inspection and repairs on firefighting garments for the Arizona market, as well as providing educational and training classes to fire departments and personnel to help them implement and adhere to NFPA 1851 guidelines.

On September 15, 2025, the Company acquired 100% of U.S.-based California PPE Recon, Inc. (“California PPE”) for a combination of approximately $2.4 million in cash consideration and 227,728 unregistered shares of the Company's common stock with an estimated fair value of $3.3 million at the date of acquisition, subject to post-closing adjustments and customary holdback provisions. Founded in 2022, California PPE is a leading and rapidly expanding UL-certified ISP in the California firefighting services market, one of the largest fire markets in the U.S. It also provides advanced decontamination, repair, and inspection of firefighting personal protective equipment, along with rental services and sales of cleaning detergents, extractors, and dryers.

On January 24, 2025, the Company issued 2,093,000 shares of its common stock in an underwritten offering at a price of $20.68 after an underwriting discount. After expenses the Company received approximately $46.2 million which was used to pay down the Company’s revolving credit facility.

On December 16, 2024, the Company acquired U.S. based Veridian Limited for cash consideration of approximately $26.3 million subject to post-closing adjustments and customary holdback provisions. Founded in 1992, Veridian is a leading provider of firefighter protective apparel, including fire and rescue garments, gloves and boots and is headquartered in Des Moines, Iowa.

On July 1, 2024, the Company acquired the fire and rescue business of LHD Group Deutschland GmbH and its subsidiaries in Hong Kong and Australia (collectively, "LHD") in an all-cash transaction. Total consideration was $14.8 million, net of $1.5 million cash acquired, of which $15.5 million was paid to retire LHD’s debt, and $0.8 million was paid to the seller at closing. LHD is a leading provider of firefighter turnout gear, accessories, and personal protective equipment cleaning, repair, and maintenance. LHD is headquartered in Wesseling, Germany, with operations in Hong Kong and Australia.

On February 5, 2024, the Company acquired Italy and Romania-based Jolly Scarpe S.p.A. and Jolly Scarpe Romania S.R.L. (collectively, "Jolly") in an all-cash transaction valued at approximately $9.0 million. Jolly is a leading designer and manufacturer of professional footwear for the firefighting, military, police, and rescue markets. The company is headquartered in Montebelluna, Italy, with manufacturing operations in Bucharest, Romania. Jolly provides a differentiated product portfolio through its continued investment in research and development and the use of modern materials and cutting-edge technologies in the production of its footwear.

The cost to manufacture and distribute our products is influenced by the cost of raw materials, finished goods, labor, tariffs and transportation. During FY26, we have experienced continued inflationary pressure and higher costs because of the increasing cost of raw materials, finished goods, labor, transportation, and other administrative costs associated with the normal course of business. The increase in the cost of raw materials and finished goods is due in part to a shortage in the availability of certain products, the higher cost of shipping, and inflation. We can only pass elevated costs onto customers in an effort to offset inflationary pressures on a limited basis. Future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect our financial results.

Impact of Russia’s Invasion of Ukraine on Our Business

The current conflict between Russia and Ukraine is creating substantial uncertainty about the role Russia will play in the global economy in the future. Although the length, impact, and outcome of the ongoing military conflict between Russia and Ukraine are highly unpredictable, this conflict could lead to significant market disruptions and other disruptions. The escalation or continuation of this conflict presents heightened risks and has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to information systems, heightened risks to employee safety, significant volatility of the Russian ruble, limitations on access to credit markets, increased operating costs (including fuel and other input costs), the frequency and volume of failures to settle securities transactions, inflation, potential for increased volatility in commodity, currency and other financial markets, safety risks, and restrictions on the transfer of funds to and from Russia. We cannot predict how and the extent to which the conflict will affect our customers, operations or business partners or the demand for our products and our global business. Depending on the actions we take or are required to take, the ongoing conflict could also result in loss of cash, assets or impairment charges. Additionally, we may also face negative publicity and reputational risk based on the actions we take or are required to take as a result of the conflict, which could damage our brand image or corporate reputation. We are continually monitoring the potential financial impact of the Russian invasion of Ukraine on our operations.

Our business in Russia accounted for approximately 2.1% and 2.4% of our consolidated net revenues for the years ended January 31, 2026 and 2025, respectively. Our assets in Russia were approximately 2.6% and 2.4% of our consolidated assets at January 31, 2026 and 2025, respectively. The net book value of our assets in Russia on Janu

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