Shares of protective clothing maker Lakeland Industries (LAKE) are bucking the current market weakness and are up more than 5% over the past three days even as the S&P 500 has gone nowhere. This relative strength comes on the back of the April 2, 2024 announcement by the company that it will be acquiring the fire and rescue business of LHD Group Deutschland of Germany and its Hong Kong and Australian subsidiaries for $16.7 million in cash. Consistent with LAKE’s long-term growth strategy, this acquisition expands its global presence in the fire service market, adding premium firefighter turnout gear and accessories, as well as laundry, repair and maintenance services, to its offerings. The deal also expands its geographic reach in Germany and Australia, two of the biggest firefighter markets in the world, as well as in Hong Kong.
More importantly, the new business is expected to add roughly $27 million to annual revenue and be immediately accretive to the bottom line upon consummation of the transaction, which is expected to close in May. When you combine this with the $21-24 million the recent acquisitions of Pacific Helmets and Jolly Scarpe are expected to add to LAKE’s sales on an annual basis, this translates into top-line growth of 34% for fiscal 2024 (which began in February) from the $126.0 million in sales analysts think it generated last year.
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In my view, this has the potential to meaningfully contribute to the company’s goal of achieving high single-digit revenue growth and bringing its adjusted EBITDA margin up to the high teens (from the 14.2% it was at in Q3 excluding the negative impact of foreign exchange) within five years. More importantly, should LAKE confirm this as I expect when it reports its Q4 results this coming Wednesday, I think the stock’s recent outperformance can continue.
Julius Juenemann, CFA is the equity analyst and associate editor of the Forbes Special Situation Survey and Forbes Investor investment newsletters. Lakeland Industries (LAKE) is a current recommendation in the Forbes Investor. To access this and the other stocks being recommended through the Forbes Investor, click here to subscribe.
