For the first half of the year (FY 19), economic growth and investment globally was relatively strong as the global economy continued its recovery from the second half of FY 2018. In the second half of FY19 we encountered headwinds due to threatened changes to U.S. trade policies relative to several key markets in which we manufacture and sell, specifically China and Mexico. In Europe, uncertainty around Brexit saw customers less confident in economic growth. This was reflected in the purchases and business investment of many of our EEC end users. This in turn limited growth opportunities in these markets while leading to more aggressive pricing from the competition which had to be met. Unfortunately during the second half of the fiscal year, global talks between the US administration and China and the U.K and European Union became more contentious and less certain. In addition, in the second half of FY19, Lakeland initiated a significant global enterprise resource planning (“ERP”) project in order to strengthen its foundation for future growth globally. The result of this investment was an increase in operating expenses and some loss of sales due to operational issues relating to the ERP implementation, adversely effecting operating results.
The Company recognizes the need to grow faster than what organic growth will contribute, so it has accelerated product development, is pressing ahead aggressively with the rollout of our new ERP system, investing in increasing our global manufacturing capacity by opening new manufacturing facilities, and investing in new manufacturing equipment and processes to reduce manufacturing costs and increase efficiencies.
Additionally, a major strategic companywide objective to accelerate growth throughout the Company is to push additional products and sales tools that are successful in the key US and China markets to the other international operations, which have traditionally carried smaller lines. To facilitate this, the Company is evaluating and redeploying sales and marketing assets into regions that offer the greatest potential for sales and margin growth.