Lakeland(US:LAKE)2021-09-10 01:06Financial Data and Key Metrics Changes - The company reported a net income of $2.6 million or $0.32 per share in Q2 fiscal 2022, down from $9.3 million or $1.17 per share in Q2 fiscal 2021 [38] - Gross profit for Q2 fiscal 2022 was $12.4 million, a decrease of 28% from $17.3 million in the same period last year, with a gross margin of 46.3% compared to 49.5% a year ago [34][36] - Operating profit was $3.6 million in Q2 fiscal 2022, down from $9.8 million in the prior year period, with operating margins at 13.1% [36] Business Line Data and Key Metrics Changes - COVID-19 related sales accounted for approximately $3.5 million in Q2 fiscal 2022, driven by demand from Southeast Asia [11] - High performance wear (HPW) sales exceeded $1 million for the first time, up about 10% sequentially from Q1 fiscal 2022 and nearly doubling from Q2 fiscal 2021 [19] - The company has seen a shift in demand from disposable and chemical garments to high-performance wear, indicating a recovery in the industrial sector [18] Market Data and Key Metrics Changes - Domestic sales in Q2 fiscal 2022 were $10.1 million, or 37% of total revenues, down from $14.5 million or 41% in the same period last year, while international sales were $17.3 million, or 63% of total revenues [31] - The U.S. market's contribution to consolidated sales fell from 46% in Q1 fiscal 2022 to 37% in Q2 fiscal 2022, indicating overstocking and logistics challenges [12] Company Strategy and Development Direction - The company is focusing on retaining accounts gained during the pandemic while also shifting towards new customer development [52] - Investments are being made in capacity expansion and higher margin product development, with a focus on international operations [33][16] - The company aims to capitalize on the new demand for specialized PPE outside of COVID-19, as well as benefiting from the expansion of the traditional industrial marketplace [22] Management's Comments on Operating Environment and Future Outlook - Management noted that while COVID-19 demand is declining, they expect industrial growth to replace it as the primary sales driver [10] - The company is optimistic about the normalization of business conditions and has maintained strong gross margins despite revenue declines [13] - Management acknowledged ongoing challenges with shipping and logistics but expressed confidence in their ability to pass on increased costs to customers [46][47] Other Important Information - The company has no debt outstanding and has a current ratio of 7.5 to 1, indicating strong liquidity [40] - Capital expenditures for fiscal 2022 are targeted at approximately $2 million, with a focus on technology infrastructure and manufacturing capacity enhancements [39] - The company has authorized a share repurchase program totaling $10 million, reflecting confidence in its financial position [41] Q&A Session Summary Question: Can you provide more details on the overstocking situation in the U.S.? - Management indicated that the overstocking began in Q1 and is expected to take two to three months to work through [45] Question: How is the company addressing high container costs and potential price increases? - Management confirmed that they are seeing price increases in the market and are confident in their ability to pass these costs on to customers [47] Question: Is there a focus on gaining market share beyond just retaining accounts from COVID? - Management confirmed a shift in focus from retention to new customer development [52]