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Termination of License Agreement with DuPont
9 Months Ended
Oct. 31, 2012
License Agreement With Dupont [Abstract]  
License Agreement With Dupont [Text Block]

13. Termination of License Agreement with DuPont

 

The Company received notice, dated July 12, 2011, from E.I. DuPont de Nemours and Company (“DuPont”) stating that DuPont was terminating the DuPont Wholesaler Agreement dated January 1, 2011. DuPont fulfilled orders for purchases of finished garments containing Tychem® and Tyvek® through September 10, 2011.

 

While products made from DuPont-branded fabrics have long been an important part of Lakeland’s product mix, in recent years we have been successfully growing our own branded product lines. This was according to a prudent strategy to reduce excessive reliance upon any one supplier.

 

We have also aggressively globalized our business over the last decade to take advantage of the fast growth in emerging markets/BRIC countries, and we are achieving positive results in Canada and Europe.  As a result, we are in a position where the loss of DuPont-supplied fabrics will have a smaller impact on our overall business and profit than it would have a few years ago.

 

These DuPont-branded garments, which were sold with the DuPont brand and marketed under restrictive agreements with DuPont, delivered a gross margin in the previous fiscal year significantly lower than the margin on the balance of all products marketed and sold by the Company worldwide which carry the Lakeland brand, so the impact of the decline on the bottom line is less significant than on the top line.

 

With the dissolution of the agreement with DuPont, we will for the first time have removed the obstacles that prevented us from fully and adequately addressing the US market, such as licensing restrictions that prevented aggressive advertising and promotion of Company-branded disposable products.  We have earlier this year launched our broad scale marketing of Lakeland branded products in the US.

 

Supporting these product introductions is the re-organization and increase in the size of the US sales force and other marketing and product strategies that had already begun just prior to the termination of the agreement with DuPont.  The fact that Lakeland uniquely among its competitors does not rely upon contract manufacturers — and thus has more control over quality — is highly valued by its customers, who also prefer to deal directly with the manufacturer.