Lakeland Fire + Safety Grows Fire Services Revenue but Faces Margin Pressure and Withdraws FY2026 Guidance
Strong Fire Services Growth Drives Q3 Sales Gains Amidst Acquisition-Driven Expansion
Lakeland Fire + Safety (NASDAQ: LAKE) reported fiscal third quarter 2026 financial results that showcased notable progress in its fire services segment and recent U.S. market acquisitions. Net sales climbed 4% year-over-year to $47.6 million, fueled primarily by a 31% surge in fire services revenue to $25.3 million. This division now accounts for 53% of Lakeland's total revenue, underscoring a strategic pivot towards higher-growth, recurring-revenue opportunities in decontamination, repair, and rental markets.
The company completed the acquisitions of Arizona PPE Recon and California PPE Recon, gaining immediate exposure to the Western U.S. personal protective equipment (PPE) markets and securing an estimated $5 million in additional annual recurring revenue. Lakeland also landed a significant $5.6 million contract with the Hong Kong Fire Services Department for advanced gear care and maintenance, marking further global reach.
| Segment/Region | Q3'26 Net Sales ($M) | YoY % Change | Notes |
|---|---|---|---|
| Fire Services | 25.3 | +31% | 53% of total revenue |
| U.S. Sales | 19.2 | +25% | Domestic mix up to 40% |
| Europe (incl. Eagle, Jolly, LHD) | 15.2 | +6% | Stable, modest growth |
| Latin America | 4.2 | -16% | Revenue pressure, macro challenges |
| Asia | 2.9 | -19% | Contract wins, but overall down |
Margins Compressed as Cost Headwinds Erode Profitability
Despite top-line gains, Lakeland's profitability was significantly impacted by rising costs. Gross profit fell by 24% to $14.1 million, while the gross margin contracted sharply to 29.7% from 40.6% a year ago. These pressures were driven by a combination of tariffs, higher freight and labor costs, inflation, and a shift in sales mix towards lower-margin product lines—particularly in Latin America and parts of Europe.
Organic revenue declined 3% and organic gross margin dropped 10.6 percentage points to 32.3%, with Latin America sales falling below expectations due to macroeconomic and political factors, including currency devaluation and uncertainty in Argentina.
| Financial Metric | Q3'26 | Q3'25 | YoY Change |
|---|---|---|---|
| Gross Profit ($M) | 14.1 | 18.6 | -24% |
| Gross Margin (%) | 29.7 | 40.6 | -1,086 bps |
| Adjusted EBITDA ex. FX ($M) | 0.2 | 4.7 | -95% |
| Adjusted EBITDA ex. FX Margin (%) | 0.5 | 10.3 | -980 bps |
| Net (Loss)/Income ($M) | -16.0 | 0.1 | -16.1 |
Outlook: Guidance Withdrawn, Cost Controls in Focus, $178 Million Tender Pipeline
Management highlighted that short-term margin pressure was exacerbated by revenue misses and the resulting loss of operating leverage. Due to persistent uncertainty around tariffs, supply chain, and global certification/tendering delays, Lakeland is withdrawing all financial guidance for FY2026 and will not issue future guidance at this time.
In response, the company is accelerating efforts to drive efficiency, streamline inventory, and reduce costs. Management expects an annualized $5 million reduction in operating expenses and a substantial inventory drawdown, which should unlock working capital and support debt reduction.
Looking to fiscal 2027 and beyond, Lakeland remains optimistic. There are roughly $178 million in global fire services tenders expected to open, including $38 million in high-probability U.S. bids. Renewed government and institutional activity, combined with operational improvements, are anticipated to set the stage for recovery and sustainable long-term growth.
Dividend Suspension and Financial Flexibility Initiatives
The Board suspended Lakeland’s quarterly dividend, effective immediately, to preserve capital and prioritize liquidity. Additionally, the sale and partial leaseback of the Decatur, Alabama facility provided $6.1 million in net proceeds, all used to reduce outstanding debt.
| Liquidity Metrics | Oct 31, 2025 | Change YTD |
|---|---|---|
| Cash & Equivalents ($M) | 17.2 | -0.3 |
| Working Capital ($M) | 105.9 | +4.2 |
| Outstanding Debt ($M) | 33.2 | N/A |
| Credit Line Available ($M) | 6.8 | N/A |
Key Takeaway: Fire Services Shine, Margin Challenges Remain, Focus Turns to FY27
Lakeland Fire + Safety’s Q3 demonstrated resilience in high-growth segments but also revealed serious cost and margin challenges—compounded by ongoing external headwinds. While the withdrawal of financial guidance and dividend suspension underscore management's caution, the focus on operational improvements, new market expansion, and a robust $178 million pipeline could position the company for a more profitable recovery as the global fire protection market rebounds.
For investors and industry watchers, Lakeland’s execution on cost reductions and its ability to convert large tenders will be critical themes heading into 2026 and beyond.
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